UK pensions department looks to compile record of funds’ ESG policies

Minister writes to pension funds in “milestone” week for ESG

The UK government has written to pension funds with a series of eight questions on environmental, social and governance (ESG) issues with a view to compiling a record of funds’ ESG policies, RI understands.

Pensions Minister Guy Opperman – who in an article in Responsible Investor in July called out fund management “zombies” – sent funds a two-page letter dated September 27 with a set of questions on stewardship, members’ views and alignment with the Taskforce on Climate-related Financial Disclosures (TCFD).

There are questions, sources who have seen the letter say, about the identity of funds’ asset managers and whether they are acting on ESG.

It is also understood that Opperman wants to see pension funds’ ESG policies with a view to compiling a record and monitor compliance and “celebrate best practice”. A Department for Work and Pensions (DWP) spokesperson declined to comment.

In his recent RI article, Opperman – whose title is Parliamentary Under-Secretary at the DWP – posed a series of questions about asset managers’ voting at company AGMs, support for shareholder resolutions on climate change and whether they propose their own shareholder resolutions.

He said he was “underwhelmed by the lack of action and urgency” on climate change by big asset managers and that pension schemes were “cast adrift on a tide of ESG greenwash” from them.The main investment bodies in the country, the Investment Association and the Pensions and Lifetime Savings Association (PLSA), responded to his criticisms here.

The letter comes as new rules were introduced this week which mean that trustees will be required to outline their approach to engagement and voting in investee companies, as well as including ESG and climate change considerations in their investment decision making.

“Cast adrift on a tide of greenwash”

Trustees of defined benefit and defined contribution occupational pension schemes with more than 100 members must set out — in their Statement of Investment Principles (SIPs) — how they take account of financially material factors, including ESG factors and climate change.

The changes reflect DWP’s 2018 updates to the Occupational Pension Scheme (Investment) Regulations 2005.

And the implementation of the EU’s revised Shareholder Rights Directive (SRD II) led to further changes to the Investment Regulations published in June 2019. These will require schemes (both DC and DB) to disclose information on issues including use of proxy advisers and how they incentivise their asset managers to align investment strategies and decisions.

The PLSA’s Caroline Escott, Policy Lead on Investment & Stewardship, called the move a “key milestone” for how pension schemes take account of ESG considerations.