Willis Towers Watson is calling for trustees to refocus priorities in order unlock “real ESG action” in UK pensions.
The consultancy firm says spending an additional eight hours a year focused on climate action on long-term stewardship could deliver significant results.
When it comes to climate action, Willis Towers Watson is calling for UK pension scheme to take three practical steps:
- quantify the scheme specific climate risks inherent in its asset and liability profile
- identify climate opportunities to improve returns and manage risk through the period of transition to a low carbon world
- implement a carbon journey plan – which would involve ‘how and when’ these risks and opportunities will be managed
In addition WTW said trustees should be looking to to ensure they set a clear stewardship policy. As part of this trustees should review investment managers corporate engagement activities and voting records on key ESG issues.
WTW says that based on analysis of typical trustee investment meetings, the additional time would be made up of two additional hours on each of the following activities: training, ESG strategy, portfolio review, ESG monitoring.
Willis Towers Waston head of UK investment advisory services David Aleppo says: “Acronyms are only useful if they spur action – and that applies to well-meaning ESG intentions too. We believe that trustees’ time is one of the most valuable levers available for bringing about lasting change. Reimagining the agenda of trustee meetings could unlock real ESG action by focusing on practical priorities.”
He adds that with eight hours per year of effective, action-orientated trustee time spent on ESG, pension schemes could begin to unlock significant impact and ultimately deliver better outcomes for members.
“Two priorities will never be enough but they can be a vital first step. Underplaying climate change is a financial risk which must be reflected in trustees’ decision making. We see these two agenda items as a way for trustees to begin turning ESG aspirations into ESG action without significant time commitment.
“Increasingly, our most successful work with pension schemes has involved both a review of portfolios and also a review of trustees’ own highly valuable time.”