The Pensions and Lifetime Savings Association is seeking views on the introduction of a new Responsible Investment Quality Mark (RIQM).
The kitemark would be awarded to pension schemes meeting the highest standards for incorporating environmental, social and governance (ESG) factors across their operation.
The PLSA says the RIQM has been developed amid an evolving regulatory environment, which now requires pension schemes to publish information on stewardship activity and how they are considering climate risk as part of their investment strategy.
Despite this though, the PLSA though notes that there is widespread confusion among pension savers as to how schemes are tackling the issue of climate change. It found three fifths (59 per cent) of workplace pension savers didn’t know if their scheme was taking any action, and just one in seven (15 per cent) believed their scheme was looking at these factors.
The PLSA said this new quality mark would help schemes demonstrate to members the action they are taking. For members it would give ‘at-a-glance’ reassurance that these issues are being taken seriously.
The PLSA said a new quality mark would also provide a new standard for schemes to aspire to and provide the opportunity to share best practice among providers.
The proposed assessment process will require schemes to meet minimum standards across seven areas:
- understanding the needs and interests of their beneficiaries
- governance
- investment strategy
- oversight of stewardship
- risk management
- the use of metrics and targets
- communication and engagement
Against each of these areas, schemes will be required to provide supporting evidence.
For schemes that are acting in ways that exceed best practice, the PLSA is also proposing an ‘RIQM Plus’ accreditation. This would be be available to schemes demonstrating industry-leading practice.
The PLSA says the RIQM is intended to be accessible for pension schemes of all types and all sizes with an assessment approach designed to respond “intelligently and flexibly” to the scale and resources of the relevant scheme. This, it said, should ensure that it isn’t just the biggest schemes that can obtain this accreditation.
The proposed standards and information about how to respond to the consultation, which closes on Friday 3 September, are available via the PLSA website.
Joe Dabrowski, deputy director of policy at the PLSA says: “Some pension funds are already deeply engaged in achieving Responsible Investment. However, this is a highly complex area so many others are looking for ways to approach the issue. We hope that by creating a new Quality Mark we can both recognise existing best practice and help other schemes understand and develop it.
“Pension funds produce lots of differing documentation to evidence how they are integrating ESG and stewardship across their scheme, but in most cases this information is designed to meet regulatory requirements and is quite hard for most savers to find and interpret. Those schemes that meet our new standard will be able to display a stamp of approval that savers can easily trust and identify with.”
Andy Cheseldine, chair of the Pensions Quality Mark Standards Committee adds: “The focus of the Standards Committee is to drive pensions best practice across schemes of all shapes and sizes. Encouraging all schemes to achieve best practice in responsible investing is an essential part of good governance, stewardship and will also help to tackle the climate crisis. We believe the RIQM will help us do that and look forward to hearing views from the industry through the consultation period.”
