On the go: The Society of Pension Professionals has launched an environmental, social and governance guide for pension trustees, aimed at schemes that do not have size and resources to effectively manage its integration.
The nine-page guide, published on Thursday, starts by advising trustees to understand how their scheme’s investments are currently held, since the type of and the structure of their portfolio “will have a bearing on the way that the trustees set an ESG approach”.
For schemes that use fiduciary managers, the SPP noted that, in most cases, trustees will be “highly reliant on the manager’s discretionary approach”.
Therefore, they should look to appoint a fiduciary manager whose approach to ESG is aligned with the trustee's beliefs and policies, the guide stated.
The second section of the guide details the current regulatory requirements for schemes in this area, such as the trustees’ fiduciary duty to invest assets in a prudent manner, set out their ESG investment policy as part of the scheme’s statement of investment principles, and report on stewardship and engagement.
Finally, the guide sets out a suggested framework for trustees in this area. These professionals are advised to set out their ESG beliefs and objectives, engage with their advisers and investment managers, and consider upcoming legal and regulatory developments.
James Riley, the SPP’s president, noted that “meeting their ESG obligations can seem daunting for pension scheme trustees”.
He said: “This is particularly true for trustees of small to medium-sized schemes with smaller budgets and which are predominantly invested in pooled funds, who believe their options for action are limited.
“This SPP guide is aimed at the trustees of such schemes. It seeks to give them high-level guidance on their legal obligations, what actions they can practically take depending on their investment structure, and how best to engage with advisers and investment managers.
“We hope that it provides practical support in navigating this ever more complex and regulated area.”
Guy Opperman, minister for pensions and financial inclusion, noted that the guide “shows trustees how to get started and highlights the common pitfalls to look out for”.
He added: “ESG is a journey, and I strongly recommend this guidance for schemes that are still in the early stages.”
