A study by Cardano, the investment management and advisory firm, has revealed that chief financial officers (CFOs) of UK businesses are “unclear and unprepared for potential impacts of ESG risks on their operations”.
The study showed that on a scale of 1 to 5, where one signifies ‘a strong view’ and five denotes ‘no view,’ CFOs rated their clarity at 2.56. Moreover, there was uncertainty among CFOs regarding their readiness to handle forthcoming climate-related regulatory requirements.
Only 37% of CFOs reported alignment between their corporate strategy and scheme ESG agendas, with 15% indicating close alignment. Conversely, 62% said their pension schemes have significantly different ESG agendas, particularly those overseeing small schemes (80%). For CFOs with large schemes (£1 billion+ assets under management), 46% noted significant differences.
The report highlighted that the largest DB schemes exhibit strong ESG alignment, with 21% citing ‘close’ alignment and 33% ‘moderate’ alignment. Notably, 39% of CFOs overseeing large schemes actively collaborate with trustees to align ESG and corporate strategies.
In contrast, 51% of CFOs for small schemes deem addressing significant ESG differences not a corporate priority, along with 20% for mid-sized schemes (£100 million – £1 billion).
Michael Bushnell, managing director and head of ESG advisory (UK), Cardano, commented: “With many CFOs lacking clarity and therefore feeling unprepared to make meaningful progress on their ESG priorities, businesses must find new ways to develop a strategy that meets increasing regulatory requirements while maximising opportunities.”
While the findings indicate a division among schemes regarding the importance of ESG alignment, there is a clear consensus on the significance of accountability for equality, diversity, and inclusion issues.
Bushnell added: “Despite growing discourse around ESG risks, the fact that corporate agendas and their DB pension schemes’ ESG priorities are at odds with one another risks creating a zero-sum game where business and schemes are pulling in opposite directions.”
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