ESG spotlight: A roundup of the latest news on environmental, social and governance initiatives, including research by Friends of the Earth that found the UK’s largest pension funds have no “credible plan” to divest the £128bn currently held in fossil fuels, and a call from LCP for defined contribution schemes to take meaningful action on net-zero ambitions.
Largest schemes have ‘no credible plans’ to divest
UK pension funds have £128bn invested in fossil fuels, amounting to £2,000 for every person in the UK, and no credible plans to divest, according to research from Friends of the Earth. The campaign group’s latest report looked at the investments of six of the UK’s largest funds and found a typical investment in fossil fuels to represent 4.3 per cent of the fund. Extrapolated to the whole pensions sector, this amounts to £128bn. Half of the biggest funds, including Now Pensions and the BT Pension Scheme, publish “no information about their investments”, while no large scheme has a “credible” plan to divest, Friends of the Earth said.
‘Time is now’ to set net-zero targets
LCP has urged DC schemes to pay more attention to ESG considerations following research that showed a quarter of schemes do not consider these factors when it comes to designing investment funds. The consultancy’s survey of 150 DC schemes found that, while regulation and government policy has prompted 61 per cent of respondents to factor ESG considerations into the design of their default funds, one in four schemes still do not. Almost half (49 per cent) of respondents do not have agreed metrics in place for their DC plan. While 48 per cent of organisations have reviewed the design of their DC scheme within the past two years, less than a quarter (24 per cent) had conducted a survey to seek employer views within the same window.
Lack of data is the biggest obstacle to ESG adoption
Around half of investors cite a lack of “robust data” as the biggest challenge to adopting ESG, according to research by Capital Group. Capital Group’s ESG Global Study 2021, which surveyed 1,040 global investors, found that more than half of respondents (53 per cent) said lack of consistency in ESG scores from ratings companies is a stumbling block when incorporating research data into their investment decision-making process. The research also showed that more than a quarter (27 per cent) ranked difficulties accessing the information they need as the leading challenge they face. Nearly half of investors (49 per cent) highlighted the need for greater transparency and consistency in fund reporting frameworks, and around four in 10 investors (43 per cent) said consistent reporting is the top driver for better ESG analysis and implementation.
