ESG pressure on pension schemes to intensify

ESG, Green_investmentsPressure on pension schemes to adopt environment, social and governance (ESG) objectives will make it harder for pension trustees to ignore the issue, pension lawyers have said.

UK-based law firm Sacker & Partners was responding to the House of Commons environmental audit committee (EAC) report on top UK pension funds’ approach to climate change risk, which accused the industry of being “worryingly complacent” about the issue.

In the report the EAC revealed that ten leading pension funds have no plans to report on climate change risks in line with international guidelines. The schemes are:

  • Electricity Pensions Trustee Ltd
  • BP Pension Fund
  • Lloyds Bank Pension Scheme
  • British Steel Pension Scheme
  • HBOS Final Salary Pension Scheme
  • Aviva Staff Pension Scheme
  • West Yorkshire Pension Fund
  • Rolls Royce Pension Scheme
  • BAE Systems Main Scheme
  • Ford Pension Fund

The committee said there were three types of pension scheme: a ‘more engaged’ group, an ‘engaged’ group and a ‘less engaged’ group.

In June the department for work and pensions will launch a consultation about clarifying ESG fiduciary duties in occupational pension schemes.

Ralph McClelland, partner at Sackers, said: “The rate at which we now receive significant publications and proposals on ESG matters suggests a real determination on the part of key decision-making bodies to start pushing changes through.”

He added: “Whilst ESG has slowly been climbing up the trustee agenda for some time, it’s still far from where it needs to be. It’s going to be hard for pension trustees to ignore these issues for much longer.”

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