Consultants seek to push up industry sustainability standards

The Investment Consultants Sustainability Working Group, launched on Monday, already counts Aon, Barnett Waddingham, Cambridge Associates, Cardano, Hymans Robertson, Isio, LCP, Mercer, MJ Hudson Allenbridge, Redington, SEI, and Willis Towers Watson among its participants, and is open to join for other companies.

Identifying a risk that new requirements for trustees to tackle environmental, social and governance risks could become a case of ticking boxes, the group will aim to speed up progress on sustainability and allow the industry to speak with a unified voice.

The stated objectives of the initiative are to engage a range of stakeholders from asset owners to managers and regulators, to ensure that outcomes are "genuinely sustainable", and to support existing industry efforts. Supporting small clients that struggle to engage with existing projects, publishing guiding principles and practical advice, and voicing opinions to regulators and others are also among the group's goals.

The focus on governance and sustainability for trustees on their investment practices is only getting better for the future

Amanda Latham, Barnett Waddingham

Founding members of the group told Pensions Expert they were impressed by the impetus already behind sustainable investing at individual consultancies, but expressed a desire to ensure the industry can act in unison.

Luba Nikulina, global head of research at Willis Towers Watson, said: "One of the reasons for creating this working group was to actually try and coordinate better and align approaches."

She said a slide into box-ticking could be driven by a wide variety of factors, including use of ESG as a marketing tool by managers, or even low engagement among trustees, but that often the reason can be more innocent.

"Sometimes, asset managers or asset owners are just clear what to do and how to do it," she said.

Standardisation improves accountability

The group has identified six individual workstreams that it plans to pursue at first: reporting; asset owners; asset managers; stewardship; regulation; and innovation, new products and impact investing.

Deb Clarke, global head of investment research at Mercer, said that by helping to standardise industry expectations on things like disclosure, asset managers will find it easier to comply with client requests, and in turn will have less excuse for not doing so.

"If we can get a clear standardisation base, where this is the minimum that we can expect of people, that would be a huge achievement," she said.

One area of discontent that may draw the group's attention is the conflict between managers and the Association of Member Nominated Trustees over who is in charge of setting voting policies.

Amanda Latham, policy and strategy lead at Barnett Waddingham, said this topic would become more prominent as trustees begin to be scrutinised on implementation statements accompanying their statements of investment principles.

She said the working group would engage with stakeholders on these issues, and Ms Nikulina highlighted that while individual schemes will want freedom to pursue their views, a unified industry voice on topics such as climate change risk could help set clear expectations of managers.

"This is where you can have a much stronger and more coordinated view from the top, and arguably it's not been coming strongly enough from asset owners," she said.

The ICSWG has recognised in its mission statement that smaller schemes are drowning in regulation, and has set a goal of creating resources to help share the knowledge that larger schemes enjoy.

Overall, said Ms Latham, trustees and their consultants cannot afford to ignore the direction of travel on regulation: "You can see from very recent consultations... that the focus on governance and sustainability for trustees on their investment practices is only getting better for the future."