The Pensions and Lifetime Savings Association (PLSA) has published a new guide for trustees to ensure schemes comply with new environmental, social and governance (ESG) requirements coming into force at the start of October.
This guide — ESG and Stewardship: A practical guide to trustee duties — approaches the new regulations in a highly practical way. It is designed to support trustees of around 30,000 DB and DC schemes, responsible for managing nearly £2 trillion.
It uses cases and myth-busters, alongside questions trustees need to address with their advisers and asset managers.
The PLSA says this should enable trustees to ensure ESG, climate change and stewardship factors are properly understood, formalised in a relevant policy and, where appropriate, reflected in broader decision-making.
Under the new requirements introduced by the Department of Work and Pensions, if trustees disregard long-term financial risks or opportunities from ESG, climate change and stewardship factors, they will need to justify why this does not harm investment returns or outcomes for their members.
This guide has been developed by a cross-industry taskforce. It complements further guidance to be published by The Pension Regulator.
The minister for pensions and financial inclusion Guy Opperman says: “This guide is particularly helpful in setting out how trustees can explore, articulate and reach a consensus on their views of the extent to which ESG, climate change and stewardship factors are priced into the market.
“It not only sets an expectation that all schemes have a responsibility here. It also highlights actions that all schemes, whatever their resources or capacity, can do.”
PLSA policy board member and chair of the ESG taskforce Brian Henderson adds: “For many pension schemes, ESG factors are already central to risk management and investment decisions.
“However, not all schemes are moving at the same pace. The ESG Guidance should have something for all trustees; ranging from those schemes that are early in their journey looking for guidance to those already implementing their agreed policies and beliefs.”
