Pension fund trustees should be aware of “greenwashing”, the Society of Pension Professionals (SPP) has warned in new guidance published today.
The UK-based body has outlined four “warning signs” to watch out for, including investment managers’ “reliance on third-party ESG ratings providers in portfolio construction”.
The Environmental Social and Governance Guide, which suggests a four-step approach to ESG for trustees, also offers examples of key questions to ask asset managers to help fiduciaries navigate a market “flooded with managers eager to demonstrate their capabilities in integrating ESG considerations and stewardship capabilities”.
The SPP also said that trustees should ensure managers’ ESG approach aligns with their own beliefs and policies, and engage with investment advisors on the topic. They should also get to grips with the “significant legal, regulatory and practical developments” set to come into force this year in the UK, such as the Department of Work and Pensions imposition of mandatory climate risk disclosure requirements for trustees of large schemes.
The guidance, which was endorsed by UK Pensions Minister Guy Opperman, outlined how trustees might integrate ESG into investment structures such as passive pooled funds and active segregated funds.
Earlier this year, DWS, Northern Trust, Minerva Analytics and Asset Management Exchange (AMX) collaborated on a new service designed to let asset owners express their voting preferences in pooled funds in a bid to address the well-documented friction between asset owners and their managers over pooled fund stewardship rights.