On the go: The UK Sustainable Investment and Finance Association has proposed a series of measures to increase sustainability in the pensions sector, as part of its new policy version.
In the document, UKSIF called on the government to step up efforts to drive forward the UK’s leadership on sustainable finance, and sets out policy solutions across different sectors of the economy for the years ahead.
Ensuring that “sustainability is at the heart of the UK’s pensions sector will be critical to secure the UK’s pre-eminence in sustainable finance, and help provide pension savers with long-term financial security”, the document stated.
To achieve this, the government and regulators should seek ways to significantly upskill pension scheme trustees in their understanding of sustainability-related risks and opportunities.
UKSIF is also supportive of wider initiatives seeking to promote better standards among schemes, such as a council of UK pension schemes recommended by HM Treasury’s asset management task force.
All actors in the investment chain must continue to work together at pace to embed stewardship into their investment processes and strategies, the association noted.
UKSIF is also encouraging investment managers to consider how to better engage with clients on voting at annual meetings, and improve their communications on how voting decisions are reached.
They hope to support policymakers and industry to start considering how the UK can embed “double materiality” into sustainable finance legislation, such as corporate reporting.
Double materiality means that businesses should report on financially material topics that influence enterprise value, as well as topics material to the economy, environment and people.
UKSIF stated that pension schemes should try to commit to net-zero, and that they believe this will increasingly be the expectation of pension scheme members.
All distributors and advisers to default funds could broaden the scope of their questionnaires to savers, beyond attitudes to risk, to include specific questions on sustainability preferences. Where appropriate, they should discuss sustainable fund options with members joining a scheme and review this regularly, the association stated.
On disclosure, UKSIF would like to see the Task Force on Climate-related Financial Disclosures extended to smaller schemes as the government consults on this in 2023, which would help the UK fulfil its ‘roadmap’ for disclosure across the economy by 2025.
This is a similar recommendation to the one made by the Treasury committee on Monday, which requested further legislation in this area.
The Department for Work and Pensions launched in January a consultation on new rules for taking action in this area, which included broadening the scope of climate risk analysis to cover not just the environmental impact of pension schemes’ portfolios, but also sponsor covenants and actuarial valuations.
The proposals stated that schemes with assets of £5bn or more will have to meet the new governance requirements from October 2021, and their trustees must publish a TCFD report within seven months of the end of the scheme year.
James Alexander, chief executive of UKSIF, said: “We should not underestimate the urgency of the ambitious actions that must be taken to ensure the UK fulfils its net-zero and sustainability ambitions, and acts as an international leader.”
He added: “UKSIF’s policy vision demonstrates that the UK sustainable finance sector is prepared to play its part and highlight the unique opportunity the government has to enhance the UK’s global leadership on sustainable finance.
“We stand ready to work with the government and others to shape the future success of this vital industry and embed the ambitious recommendations we have outlined, from the future of sustainable finance standards to net-zero pathways and biodiversity.”
