The Pensions and Lifetime Savings Association is consulting on a new set of standards designed to help pension savers identify whether their schemes are meeting the highest standards for incorporating environmental, social and governance factors.
The so-called Responsible Investment Quality Mark has been developed amid an evolving regulatory environment and a momentum shift in public and industry attitudes towards climate change and ESG.
Announcing the launch of the consultation during his opening remarks at the PLSA’s inaugural ESG conference on Wednesday, Julian Mund, PLSA chief executive, said: “We’re going to bring our industry together with a new set of standards that allow [pension schemes] to record and demonstrate the good work and the progress that [they] are making on responsible investment.”
Those schemes that meet our new standard will be able to display a stamp of approval that savers can easily trust and identify with
Joe Dabrowski, PLSA
The RIQM will cover saver communication and interests, governance and stewardship, investment strategy and risk management. Its development builds on the experience and success of the Pension Quality Mark, the accreditation for defined contribution workplace savings plans developed in 2009 by the association.
Mund said this new quality mark would help people “recognise the value of an employee benefit that will have a long-term impact on their lives”.
He pointed out that ESG was the number one priority for PLSA members, ranked more important than defined benefit funding, member engagement, pensions dashboards, data or guaranteed minimum pensions.
Despite the focus on the subject, a recent PLSA survey of more than 2,000 adults found that while 80 per cent of those surveyed said global warming was an important issue to them, just one in seven think that their schemes are taking action on the subject.
Helping schemes understanding responsible investment
Furthermore, 68 per cent of respondents said that pension schemes should be transparent about whether they invest in a climate-aware way.
It is hoped that the RIQM will help scheme members better understand the work their schemes are doing in the responsible investment arena.
Joe Dabrowski, deputy director of policy at the PLSA, said: “Some pension funds are already deeply engaged in achieving responsible investment. However, this is a highly complex area so many others are looking for ways to approach the issue.
“We hope that by creating a new quality mark we can both recognise existing best practice and help other schemes understand and develop it.
“Pension funds produce lots of differing documentation to evidence how they are integrating ESG and stewardship across their schemes, but in most cases this information is designed to meet regulatory requirements and is quite hard for most savers to find and interpret.”
Dabrowski continued: “Those schemes that meet our new standard will be able to display a stamp of approval that savers can easily trust and identify with.”
Consultation on the RIQM closes in September and the final standards will be launched in October ahead of the COP26 summit that is due to take place in Glasgow.
Working within ‘planetary boundaries’
Elsewhere on the first day of the conference, chef, broadcaster and environmental campaigner Hugh Fearnley-Whittingstall talked about how the UK food industry could contribute to climate solutions, while in a short message, HRH the Prince of Wales said he was “fed up” with all the talk around solving the climate crisis as he urged those in the finance industry to take action.
“The big global investors have been telling me there is no shortage of money, which is hardly surprising I suppose as much of it has come from overexploiting nature. So now we need to put some of that money back into supporting and regenerating nature’s own capital so that we can then draw a durable income from it for the future but within planetary boundaries,” he told conference delegates.
“Your ability to raise and allocate funds for transition and adaptation, to imbed greenhouse gas reductions within your organisation’s decision-making processes, to influence others and to track and report on progress against these targets places you at the very heart of the transition.”
Echoing the sentiments of an increasing number of commentators, the Prince of Wales concluded: “This is not about making money on the one hand and being sustainable on the other.
“Those organisations that invest in the future by putting nature, people and planet at the heart of global value creation will be the ones to succeed.”
