There are concerns that many pension schemes are still failing to ‘engage meaningfully’ with regulations designed to address climate risk and ESG factors.
These comments were made my Lauren Wilkinson a senior policy research at the Pensions Policy Institute at Corporate Advisers’ virtual ESG Forum.
Wilkinson says engagement and knowledge of these issues was increasing.
However recent PPI research indicates that following the introduction of rules of ESG reporting, 38 per cent of schemes had made minimum changes to the Statement of Investment Principles (SIP), but had not made any changes to their underlying investment portfolio.
She says there were concerns that while there was more engagement on this issue it was not always translating to meaningful changes to the underlying portfolio. For example some SIPs simply reference ‘ESG risks such as climate change’ but this is an exact echo of the wording of the legislation without giving further details.
She said though that there has been a shift in attitudes since the PPI first started looking at this issue two years ago. She says that 2 in 5 companies now see the implementation of material changes to their portfolio as a ‘work in progress’.
Wilkinson adds: “These changes will take time to work through particularly for those schemes who were not engaging at all in ESG issues prior to the legislations”
Wilkinson adds that while climate change and environmental issues were at the top of the ESG agenda, there was scope for there to be far more of an emphasis on social issues. These have been brought to the fore in 2020, she says, as a result of the coronavirus pandemic.
“We want to see a broader range of issues and risks integrated into an investment strategy.” She highlighted five areas where future development was needed. This included standardisation of data, better engagement activities and integrated goals.
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