On the go: Trustees are universally well prepared for the new responsible investment regulations that come into force on October 1, with an astonishing 96 per cent saying they are up to speed.
According to Hymans Robertson research, an overwhelming 70 per cent of those polled also favoured their introduction .
To comply with the new regulations, trustees of defined benefit and defined contribution schemes must agree their approach to RI and update their statement of investment principles with more detail, addressing financially material environmental, social and governance risks, such as climate change. They will also need to include broad wording on their engagement and voting policies.
Getting ready was a huge challenge for trustees, with more than eight out of 10 having difficulty implementing the new requirements – 43 per cent blamed a lack of clarity around the regulator’s expectations, 44 per cent cited low engagement from members, and 40 per cent said they had limited time and resource.
Limited knowledge and understanding around RI issues presented a barrier for 40 per cent, while 24 per cent also said that the language used around RI was not well defined and clear. Despite this, only 7 per cent of trustees opposed the regulations.
Commenting on trustee preparations, Simon Jones, head of RI at Hymans Robertson, said: “It has been encouraging to see that the response by trustees has been more than just talk, with many trustees having taken action in response to the regulations. Eighty-four per cent of trustees questioned had increased training on RI.
“Trustees also need to provide greater challenge to those, such as investment managers, who act on their behalf. Three quarters (73 per cent) had improved reporting on and oversight of investment managers, while half said they’d changed member-engagement strategy.”
He continued: “I was pleased to see that half (49 per cent) said they thought implementing an RI strategy would improve investment returns, which represents a significant shift in the attitude that has prevailed until now – that investing responsibly will harm returns.
“It isn’t just their opinion that is important – many are also seeing the pressure from members. Nearly a third (30 per cent) have said that they think their members care just as much about where their money is invested as they do about investment returns.”
Trustees must also gear up for further change. From October 2020, all trustees must publish their SIPs online and report annually on their stewardship activities.
They will also have to set out in far more detail in their SIPs on how managers are incentivised to align their investment decisions with trustee policies and make decisions based on long-term financial assessments.
