A more joined-up approach across stakeholders is needed to improve UK pension scheme engagement with climate change, according to a new report from the Pensions Policy Institute (PPI), a think tank.
The report triggered a call from the report sponsor, Phoenix Group, for the ESG “ecosystem” to be simplified.
The PPI’s report delves into the attitudes and behaviours affecting consideration of climate change in pension scheme investment. It said pension schemes would need to take direct action, but also flagged the need for a more coherent approach across government and industry.
According to the PPI report, the latter includes establishing a consensus across all stakeholders – government, schemes, asset managers and platform providers – on goals, and the practical steps needed to achieve them.
It would also involve encouraging innovation from third parties with regard to products and strategies, but also data provided to pension schemes about their own activities relating to climate change.
The PPI report also suggests producing a centralised data source that “can provide a starting point for schemes that are unsure where to begin or are overwhelmed by the quantity of data available, particularly given inconsistency across different metrics”.
For Phoenix Group, a FTSE 100 long-term savings and retirement business, the report showed a need for harmonisation.
“What is clear from this report is that there is no easy or quick fix to the issues we face,” said Michael Eakins, CIO at Phoenix Group, said. “Both industry and government must work hand in hand to establish a consolidated strategy, with simpler, centralised data sources.”
Gareth Trainor, head of investment solutions at Phoenix Group, added: “On ESG, we risk both too much, and too little leadership.
“There are many industry groups, regulations, initiatives, and competing propositions to consider, and the industry needs to get their ducks in a row. The ecosystem needs to be simplified for pension schemes and their members.
“Although many pensions’ schemes, advisers, asset managers, trustees and providers are doing a good job at incorporating ESG risks into their strategies, we believe that it is time for industry bodies to pool their collective capabilities and lead the sector by harmonising what best practice looks like.”
Sustainable data group as ‘regulator sounding board’
Moody’s ESG Solutions Group and S&P Global have joined Refinitiv as members of a “council” on sustainability data aiming to deliver market insight to global regulators.
Operating under the banner of the Future of Sustainable Data Alliance (FoSDA), the newly launched unit said it would seek to act “as a much-needed industry and regulator sounding board focused on data needed for sustainable finance”.
”This group of market data experts will serve to add realistic insight into the exploding volumes of data being used and demanded to deploy capital sustainably and will help chart a path forward with increasing efficiency and transparency, the FoSDA said in a statement yesterday.
“The Council wil help address critical questions in relation to the role, the indications, and the learnings we can glean from data to inform sustainable policy, investments and business decisions.”
Members of the group would in particular look to tackle the question of what datasets are needed to meet the requirements of regulators, citizens, and the market.
The hope is that other data providers will join the group. The FoSDA was launched in January 2020 at the World Economic Forum. Founding partners include the WEF, the Institute of International Finance, and Climate Bonds Initiative.
In a recent asset owner-focussed report, consultancy bfinance said the main challenge for investors with ESG objectives was a lack of progress on transparent, standardised data and reporting, and that they were looking to legislators and regulators to take a more active lead in this area.
Earlier this week the UK announced the launch of a centre aimed at improving the climate data and analytics accessible to financial institutions. A key focus of the work will be on enhancing the quality and availability of inputs for data providers.