A UK responsible investment association and the Association of Member-Nominated Trustees (AMNT) have sought to harness the power of consultants to promote trustees’ consideration of environmental, social and governance (ESG) factors in investment decision-making.
In an initiative co-ordinated by the AMNT and the UK Sustainable Investment and Finance Association (UKSIF), 12* influential investment consultants have committed to back guidance from the UK pensions regulator that trust-based defined contribution (DC) and defined benefit (DB) pension schemes should take ESG factors into account where they are financially material.
The advisory firms said they would draw attention to the guidance through various routes, such as putting consideration of ESG on trustee meeting agendas, issuing briefings, and holding training sessions.
“We also recognise the significant role that client-facing consultants can play in ensuring that our clients are well informed on the issues,” they added in a joint statement.
Dawn Turner, chief executive of the £23bn (€26.2bn) Brunel Pension Partnership, said the consultants’ public commitment was “a major step forward”.
She added that Brunel would help ensure the initial positive step served as “a catalyst to ensure ESG issues are at the heart of the client offering to the investment consultant industry”.
The AMNT and UKSIF said they acted on behalf of members to convene leading UK investment consultants to ask how they would act on the guidance issued by The Pensions Regulator (TPR).
Fred Berry, lead investment consultant at TPR, said that many trustees – in particular those without a financial background – rely on advisers to keep them up to date with the regulator’s news and guidance.
“We expect investment consultants and others advising pension schemes to support trustees to manage risks to member benefits, including risks to the sustainability of the scheme’s investments,” he added.
The consultants’ declaration coincides with the opening of the annual conference of the UN Principles for Responsible Investment in Berlin today.
Many pension funds, in particular smaller, resource-constrained schemes, rely heavily on advice given to them from their advisers, a state of affairs highlighted as a concern by the Financial Conduct Authority. It was one of the reasons the UK regulator called for a competition investigation into the investment advisory sector. This is just beginning to get underway.
*The 12 consultants are: Allenbridge, Aon Hewitt, Barnett Waddingham, bfinance, Cardano, Hymans Robertson, JLT Employee Benefits, Lane Clark & Peacock, Mercer, Quantum Advisory, Redington, Willis Towers Watson