Large defined benefit (DB) “dinosaurs” must be aware of the importance of integrating environmental, social and governance (ESG) issues into their fixed income portfolios, the UK’s ShareAction has said.

The comments, made by the lobby group’s chief executive Catherine Howarth, come as it published research arguing that while stewardship efforts by the largest UK pension funds had improved over the last five years, a number of funds failed to offer detailed responsible investment (RI) policies.

Of the 28 schemes ranked, including two of the UK’s largest in the Universities Superannuation Scheme and the BT Pension Fund, ShareAction found that 17 had drawn up an RI policy.

However, it was critical of the level of detail offered in a number of the policies.

“[Six] out of the 17 policies we received made only vague and generic statements, a typical example being: 'The Trustee expects the investment managers to take steps to ensure environmental, social and corporate governance factors are implicitly incorporated into the investment decision-making process',” the report, Entrusted with our Future, said.

Howarth acknowledged that a number of the DB schemes approached would be shifting away from large equity portfolios as they de-risked their investment strategies.

“It’s not hugely surprising some of these big, old DB dinosaurs are very focused on de-risking now and their principle concern is managing quite near-term risk as opposed to the huge need to manage long-term risk, including ESG risk, [important] for younger members in DC schemes," she said.

The chief executive said it was for this reason its survey examined four of the DC funds launched to offer pensions to auto-enrolled employees.

The National Employment Savings Trust (NEST), the highest-ranking of the four trust-based providers, would have come in ninth place, behind the Pension Protection Fund, had ShareAction listed both DB and DC funds in the same ranking.

The chief executive added that, even if DB funds were slowly lowering their equity exposure, there was still work to be done as far as raising RI issues.

She praised work by some fixed income asset managers in integrating ESG analysis and risk into their investment approach towards corporate and sovereign bonds.

She added: “We would very much encourage big DB schemes, where they have a lot of exposure to fixed income, to be alert to those issues and to be actively encouraging managers to show how they are managing that risk effectively on behalf of the members.”