‘Build back better’ hits wall as trustees report trouble aligning

Canada Life Asset Management’s ‘The role of institutional money’ report, which surveyed 203 respondents including trustees, investment managers, fund managers and controllers, revealed a broad awareness of the agenda, with 31 per cent of those surveyed being very familiar with it, and 65 per cent moderately familiar. 

However, there are significant barriers to these investments, with almost half (43 per cent) of the respondents saying long-term planning was an issue, and a similar number (44 per cent) pointing out that a lack of investment opportunities was holding back pension schemes.

The industry has faced a flurry of environmental, social and governance regulations in recent months as the government looks to entrench its ‘net zero’ climate commitments and free up more pension funds to invest in green infrastructure and other projects.

Schemes with more than £1bn in assets will have to comply with disclosure requirements from October this year, while further regulations seek to bring climate change risk, governance and reporting practices into line with the new standards.

The government has long been keen that defined contribution pots in particular are tapped for investment in the build back better agenda and the post-coronavirus economic recovery, though this has proven difficult to achieve in practice.

Canada Life’s report also found that a lack of capital was a key concern, with 43 per cent citing it as a barrier.

Almost half (41 per cent) said the amount of new regulation was a challenge, while more than a third (39 per cent) said there was “limited will to align investment strategies with the plan,” and 26 per cent cited “client reluctance”.

The report also showed that there was a greater uptake in longer-term strategies than short-term ones. Net zero and opportunities for growth were incorporated into 72 per cent and 93 per cent respectively of the former, while just 41 per cent and 32 per cent had investment strategies focusing on the shorter-term skills and infrastructure pillars of the plan.

Michael White, head of UK property at Canada Life Asset Management, said: “Since the start of the pandemic the government has made many calls for institutional investors to support the country’s efforts to build back better.

“While pension trustees and investment managers are familiar with the government’s intentions and many are showing an appetite to align their investment strategies with the key pillars of the build back better plan, they are facing significant barriers. This ranges from a lack of long-term planning to limited investment opportunities.

“If the build back better plan is going to be a success, it is crucial that the industry overcomes these barriers. This can only happen if stakeholders across the asset management industry work collaboratively, supported by clarity of policy, to ensure institutional money can be put to good use and create a positive impact for society.”