Proposal to improve pension fund ESG disclosure tabled in UK Parliament

Move could impact Statements of Investment Principles

Pension funds in the UK may have to disclose more on their environmental, social and governance (ESG) activities if proposed amendments to existing legislation are adopted.
The motion – brought by Lord German, co-chair of the Liberal Democrat Parliamentary Committee on Work and Pensions – covers both occupational and stakeholder (defined contribution workplace) schemes. The LibDems are the junior partner in the governing coalition.
It comes as the Pensions Bill 2011 is undergoing “line by line examination” in the Grand Committee in the upper chamber of Parliament, the Lords.
Lord German’s motion calls for further guidance on the extent to which environmental, social and ethical considerations “are taken into account in the selection, retention and realisation of investments”. And it also covers the information provided about the exercise of voting rights.

The amendments would require guidance to be published by the government on the preparation of funds’ Statements of Investment Principles (SIPs).Pension schemes have been required to include their policy (if any) on social, environmental and ethical issues in their SIPs, since 2000. Despite this, campaign group Fair Pensions argues that the disclosure by funds remains “generally poor”.

Lord German is himself a trustee of the National Assembly for Wales’s pension fund.
The tabling of these amendments follows an adjournment debate in December in which Pensions Minister Steve Webb said he would raise responsible investment and pension fund transparency with incoming Pensions Regulator Michael O’Higgins.
“We’re delighted that Lord German has laid these amendments to The Pensions Bill,” said Catherine Howarth, CEO of FairPensions, which has helped the process.
“The Deepwater disaster in 2010 should have removed all doubt that environmental and social issues can affect savers’ returns. The amendments would provide pension savers with a greater ability to make their pension funds accountable for the way these types of risk are being managed. ”
Link to amendments (see 53 and 54).