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Yesterday, the UK’s Pensions Minister Guy Opperman, writing exclusively for Responsible Investor, launched a broadside against the pensions and asset management sector’s response to climate change – calling out fund management “zombies”.
He wrote: “You might think that with all the mounting evidence of the climate emergency that we face we could expect that powerful asset managers are responding and acting by investing in the long-term best interests of their clients and beneficiaries.
“But after two years in my job as Minister for Pensions I am underwhelmed by the lack of action and urgency on this vital issue among large numbers of big asset managers.”
He outlined a situation where pension schemes were “cast adrift on a tide of ESG greenwash from investment managers”.
So how has the industry responded? RI put Opperman’s criticisms to the Investment Association, the trade body for the £7.7trn (€8.5bn) fund management sector, and the Pensions and Lifetime Savings Association (PLSA), which represents more than 1,300 pension schemes — and £1trn in assets.
Here’s what they said:
Galina Dimitrova, Director for Capital Markets, Investment Association: “Social and environmental change is happening faster than ever before and our industry is at a critical juncture in embracing sustainability as a defining feature of the investment landscape.
“Investment managers have an important role to play in building a more sustainable future”
“Investment managers have an important role to play in building a more sustainable future by channelling finance from savers to companies and infrastructure projects, and engaging with the companies we own on climate change, as well as all other material environmental, social and governances factors. Sustainability and responsible investment is also of increasing importance for today’s savers and it is our role and priority to help them achieve their financial, as well as their environmental and social goals.”Caroline Escott, Policy Lead: Investment and Stewardship, PLSA: “The PLSA supported the Government’s 2018 changes to the investment regulations to help trustees incorporate financially material Environmental, Social and Governance (ESG) factors and to undertake better stewardship approaches. This approach followed on from our 2017 Stewardship Survey where 76% of respondents agreed that ESG considerations are financially material to their investments. To provide further help for schemes, we’ve produced a number of practical guides –including our More Light, Less Heat report as well as our annual AGM Review and Corporate Governance Policy and Voting Guidelines – to help trustees incorporate climate considerations into their investment decisions. We will be updating these last two documents for 2020 to reflect recent developments and initiatives.
“The PLSA is working to support schemes in considering climate risks”
“There is already a wealth of ESG funds and products in the market and that number is only going to increase. It’s vital that pension schemes are able to distinguish between managers talking the talk and those just making the right noises. We’re pleased that Guy Opperman has suggested a number of interesting and useful questions for trustees to pose. We’d also like to suggest a few of our own which trustees can use to differentiate between managers.
“For example, how many collaborative ESG initiatives have fund managers signed up to and how many of these does the manager play an organisational role in? Also, how many individual company engagements has a manager delivered on climate risk and what proportion of those engagements delivered tangible change?
“These questions would further help distinguish between managers who just sign up to collaborative initiatives to tick a box without playing an active role as well as ensuring the asset manager needs to give a thoughtful response.
“The importance of financially material ESG factors such as climate risk should not be underplayed and the PLSA is working to support schemes in considering climate risks. As part of this push we are part of the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) working group on asset owner guidance around the Task Force on Climate-related Financial Disclosures (TCFD). We also recently published our ESG Guidance which provides practical, step-by-step guidance to help trustees meaningfully consider, design and implement ESG and stewardship approaches.”