Investment Themes
ESG - It's not what you say, it's how you say it
Improving trustee engagement with Environmental, Social and Governance risk factors through better framing and explaining.
Chris Wagstaff, Head of Pensions and Investment Education Columbia Threadneedle Investments
As all trustees of UK occupational pension schemes are well aware, from 1 October 2019 they have had to set out how they take account of financially material risks. Crucially, these include material Environmental, Social and Governance (ESG) risk factors, notably climate risk, prospectively the most material and systemic ESG risk of all.
However, in being tasked with taking a position on ESG, trustees don’t always have the available information, or the information framed and explained in such a way to make an informed decision about what constitutes a coherent ESG risk management policy, or responsible investment framework. Indeed, most trustees are often reliant on their asset managers and their investment consultant to inform their approach – something that can result in trustees seeing this merely as a tick box exercise, despite the ever increasing risks of doing so. Indeed, it appears that few schemes are currently going beyond the minimum regulatory requirements and few trustee boards are designing bespoke policies with many being heavily guided by advisers’ and providers’ default positions.
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