Misaligned ESG intent and action despite strong support from pension plan trustees
According to a study by XPS Pensions Group, less than half (40%) of defined benefit (DB) pension plan administrators believe their plans’ environmental, social and governance (ESG) policy reflects their preferred approach. sustainable investment.
The results raised concerns about the persistent gap between intention and action on ESG integration, as the survey also found that almost all (95%) directors agreed on the importance of ESG investment principles.
Indeed, the results suggest a “clear desire for change in the industry,” with 83 percent of directors saying stewardship plays an important role in how plan assets are managed.
However, while 85 percent of directors agreed that it is important to communicate their plan’s responsible investment strategy with members, only 46 percent believe that members’ views should be taken into account when making decisions. adopting an investment strategy.
On top of that, 78 percent of those surveyed wanted to monitor the activity of investment managers beyond minimum compliance checks to avoid greenwashing.
However, this is not the only step admins can take to ensure that their ESG approach is aligned with their preferences, as XPS has also outlined a number of areas of interest that admins can adapt in order to help bridge the gap between intention and action.
This included improved practices and reporting from fund managers to ensure accountability, a focus on innovation for fund products and the development of a UK specific equivalent of the EU Disclosure Regulation. sustainable finance.
XPS Pensions Group Chief Investment Officer Simeon Willis commented, “We are in the midst of a significant leadership change in the industry. This survey clearly shows that ESG has rightly gained the support and buy-in from the directors, but there is still a lot of work to be done from there.
“We need clearer terminology, better information and more choices to make it easier for systems to invest in sustainable products.
“Fortunately, the asset management industry has been involved in this area as well, and has been for some time. When we surveyed 90 representatives of UK fund managers at our 2019 conference, 76% believed investments should be used as a positive force against climate change.
“But even with this good intention, we must act quickly as time is running out to align pension portfolios with the Paris Agreement goal of keeping global warming well below 2 ° C.”