PLSA publishes SIP reporting guidance ‘just in time’

Under new implementation reporting requirements, which come into effect in October 2020, scheme trustees will be required to produce implementation statements disclosing how they have followed the objectives and policies set out in their Statement of Investment Principles over the previous year.

In the PLSA Implementation Statement Guidance, published on Friday, the association set out what the legislation requires and by when, as well as some high-level “general principles” for implementation statements and more-detailed possible considerations.

The content and timing requirements in particular are complex, with traps for the unwary or unprepared

Stuart O'Brien, Sackers

It also covered specific guidance on voting behaviour and tips for investment – and specifically responsible investment – communication.

The new requirements differ for trustees of DC, hybrid and DB-only schemes.

DC and hybrid schemes will be required to disclose against all parts of their SIP, while DB-only schemes will only need to disclose on their voting and engagement behaviour.

The guidance was produced by the PLSA’s Voting and Implementation Statement Working Group, a cross-industry group of experts, as well as a stakeholder group of representatives from government, regulators and industry organisations. It expands on the PLSA’s 2019 ESG and stewardship guide for trustees.

ESG considerations

Laura Myers, PLSA working group chair and policy board member, said: “The recent changes to the Occupational Pension Scheme (Investment) Regulations 2005 have put the onus on schemes to not only provide more details around how ESG considerations impact their investment decisions, but also to improve trustees’ investment decision-making and governance more generally.”

On July 29, Nest announced a new climate change policy to decarbonise its investment portfolio, with the expectation that carbon emissions in its portfolio will halve by 2030.

The pension scheme set out a goal of being net-zero across its investments by 2050 or earlier, and pledged to review its policy annually.

Ms Myers continued: “The implementation statement requirements are just one part of the rapidly increasing expectations from policymakers, regulators and members for schemes to do more to demonstrate transparency, public accountability and good corporate governance.

“The PLSA believes that the implementation statement can be a useful tool for trustees to demonstrate the work that they are undertaking on members’ behalf, as well as to reflect on areas for improvement or change.”

She added that the aim of the guide was to “cut through some of the confusion” around implementation statements and give “practical steps” on how to collate this information and communicate it to stakeholders.

Guidance ‘just in time’

Amanda Latham, associate and policy and strategy lead at Barnett Waddingham, said the guidance was “coming just in time” given the October commencement date.

“Reporting on implementation will focus minds on how they are delivering their investment and stewardship policies, encouraging trustees to adopt a long-term focus considering social and environmental issues, and being transparent about how they invest,” Ms Latham said.

In the section ‘How to prepare the implementation statement’, the PLSA stated that some schemes may need to prepare implementation statements “very soon” after October 1 2020.

It added that it is advisable for all schemes to start asking their advisers and asset managers for the relevant information “at the earliest opportunity, given that the first reporting period will already have begun for all schemes”.

Stuart O’Brien, partner at Sackers, said: “Implementation statements are going to be a new challenge for trustees. The content and timing requirements in particular are complex, with traps for the unwary or unprepared.

“Trustees will also need to get to grips with what questions they should be asking their managers and how they can best present the required information for their members.”

He welcomed the PLSA guide as the first in the industry to provide some clarity on these issues and “practical tips for trustees to get started”.

But he added that the “real game-changer” was likely to be the forthcoming PLSA "Vote Reporting Template" referred to in the guidance.

In the guidance, the PLSA stated that the voting template is due in summer 2020 and “will provide managers with a client-relevant, consistent and comparable way of reporting their voting behaviour to pension schemes”.

Mr O’Brien said: “If trustees and managers adopt this widely it should make the reporting process that much less painful for all concerned.”

Ellie Duncan is a freelance journalist