Sharing the load: why asset owners are supporting each other on sustainability reporting

A new tool sees pension funds working with industry bodies, stakeholders and regulators to simplify sustainability reporting requirements

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UK pension funds, USS, Brunel Pension Partnership, BTPS, the Church of England Pensions Board, RPMI Railpen, (as members of the UK Pensions Roundtable) and consultant, Chronos Sustainability, have released a new reporting tool to help asset owners meet their responsible investment and stewardship reporting requirements efficiently and effectively. 

As asset owners, reporting on our approach to stewardship and responsible investment provide us with the opportunity to reflect on how we can strengthen our investment processes and investment performance, and maximise the positive real-world impacts of investment activities. 

This reporting is also an integral part of how we engage with our stakeholders, including our beneficiaries, our regulators, our investment managers and our teams. This reporting permits us to explain our approach to responsible investment and allows our practices and performance to be compared to others. 

Being challenged, measured and encouraged to keep moving forward is essential if responsible and sustainable investment is to drive the outcomes necessary to protect and enhance our environment, our societies and our economies.  However, as with everything else that we do, we need to ensure that the time and resources we commit to reporting are well spent. We want to produce information that is useful for our own decisions and for the decisions our stakeholders need to make, we want to provide this information in a timely manner, and we want to do so as efficiently as possible.

As a result, in late 2020 members of the UK RI Roundtable including USS, BTPS, Brunel Pension Partnership, the Church of England Pensions Board and RPMI Railpen, with the help of Chronos Sustainability, put our heads together to develop a practical tool that would help us and other asset owners facing similar reporting challenges to better manage our reporting. 

We decided to focus on what we agreed were the three most significant reporting obligations we face as UK pension funds: the UK Stewardship Code, the PRI’s Reporting and Assessment requirements and the Pension Regulator’s Implementation Statement. We were, of course, aware that there are other reporting requirements on the horizon – including the EU Sustainable Finance Disclosure Regulation (SFDR), TCFD and emerging net zero disclosure requirements – but we decided to focus on those that are the most important now.  

The reporting tool maps these three reporting requirements against each other, allowing users to identify, for example, which elements of the PRI’s reporting requirements may help meet the Stewardship Code reporting requirements. It also provides a checklist of reporting requirements, which can be used to assess the completeness of reporting.

Reflecting on the lessons learned through this process, and from our recent experiences of preparing reports and responses, three things became clear.

The first was the sheer complexity of the reporting landscape, and of the different reporting obligations we as investors need to meet. For example, an asset owner reporting on all asset classes under the PRI survey could be required to provide over three hundred and fifty distinct items of information or data points.

The second was the significant resource implications of reporting, especially if you want to do a good job of reporting. For example, USS’s draft PRI submission alone is almost 350 pages, and USS needed to hire a consultant to help it complete its Stewardship Code report.  

The third was that, while there are some efficiencies to be gained, there are not many relative to the volume of material we are reporting. We found that the details of the reporting requirements – essentially a survey in the case of the PRI, compared to a free-standing report for, say, the Stewardship Code – mean that while there are some commonalities on data and indicators, there is inevitably a large amount of additional writing and text editing involved in preparing submissions.

We understand that different stakeholders have different needs and we are realistic enough to know that we will probably never get perfect alignment across reporting frameworks. That said, we remain committed to comprehensive reporting on our approaches to responsible investment and stewardship. We are also committed to working with our industry bodies, with industry peers and with other stakeholders including regulators to see if we can simplify the reporting requirements that we face. 

This reporting tool is one part of that process. We intend to use it to explore the potential for consolidating reporting requirements (e.g. whether comprehensive reporting against the PRI’s Investment and Stewardship Policy module could also meet the Stewardship Code reporting requirements, or vice versa), and the potential for reduced reporting burden on asset owners (e.g. where leading organisations only report biannually rather than annually).

Returning to where we started: responsible investment and stewardship reporting is a central part of what we do and of how we engage with our stakeholders and with wider society. But it is also complex and demanding. And it is clear that there is much to be gained by simplifying, standardising and optimising the reporting process.

The reporting tool can be found here.  

David Russell is Head of Responsible Investment at USS Investment Management and Dr Rory Sullivan is CEO at Chronos Sustainability