On the go: Environmental, social and governance factors are a hot topic for trustees, with 53 per cent of trustee boards considering it an important agenda topic, new research has shown.
According to a survey from the Pensions Management Institute and BMO Global Asset Management, which polled 75 PMI members, including professional trustees, lay trustees and pension managers, this is an increase in relevance.
Before the Department for Work and Pensions’ consultation on climate risk in August 2020, ESG was important for just 29 per cent of trustee boards.
As reported by Pensions Expert, the DWP stated that trustees will be required to report their schemes’ climate change investment risks by October.
Schemes with more than £5bn in assets will have to comply with the new rules later on this year, publishing Task Force on Climate-related Financial Disclosures reports and including a link to these in their annual report and accounts.
The PMI/BMO survey showed that 89 per cent of respondents are confident that structures would be put in place to meet the TCFD reporting rules.
Nevertheless, 20 per cent of respondents admitted that they did not fully understand the new rules, and 19 per cent stated that they have not received training on climate change risks and opportunities.
In addition, almost half (48 per cent) of the PMI members polled felt that their board is set out to deal with only some aspects of ESG and the impending regulatory changes.
PMI stated that, unsurprisingly, 73 per cent of respondents explained that they rely on their investment consultants for their scheme’s adherence to the ESG responsibilities they face.
However, 25 per cent of trustees are not confident that their investment managers are holding their underlying investments to account for net-zero emissions targets.
There are also material obstacles to implementing ESG policies for 61 per cent of respondents, including 25 per cent who believe that a lack of evidence of the financial performance of ESG investments is the biggest problem.
A further 17 per cent think a lack of products and services in the market is the greatest obstacle, despite recent product launches.
Gareth Tancred, chief executive of the PMI, said: “Many will be glad to see that ESG is now considered a top priority for most trustee boards.
“However, it is concerning that a significant proportion of trustees do not feel fully confident in understanding the upcoming TCFD rules and responsibilities.”
He added: “Given the stakes, this has to be addressed as soon as possible. We would encourage those trustees that are yet to engage with ESG to learn more about it to see how their scheme can more effectively manage climate change risks and opportunities.”
