With the role of environmental, social and governance (ESG) factors in pension scheme investments becoming an increasingly prominent topic amongst the pensions industry, the Pensions Minister, Guy Opperman MP, recently expressed concern over the misconception that stewardship is not a key part of the trustee work when speaking at the Pensions Age Autumn Conference on 16 September 2021. Opperman noted that, whilst the fragmented nature of the UK’s pension system does not help drive the stewardship cause, it is essential that more emphasis is placed on stewardship in order to create sustainable solutions for the pensions sector.
We recently reflected on ESG in the pensions industry during our webinar (recording available here), and highlighted practical concerns trustees face when making investment decisions. A discussion around the role of stewardship suggested that the influence of IT and the introduction of pension dashboards in 2023 should help with increasing member engagement. The DWP’s call for evidence regarding the financially material social risks and opportunities with which the pensions industry is faced helped identify that, in order for a scheme to capture the wide-ranging meaning of each ESG factor, access to relevant data is essential. Indeed, Opperman made it clear that a holistic approach to all ESG factors is necessary; it is not possible to contemplate a solution in one area without considering the others.
In an attempt to ramp up progress on stewardship, the government launched the Occupational Pensions Stewardship Council in July 2021. The government is also seeking to address the disjointed nature of the UK pensions system through consolidating the market into fewer, larger schemes. It is clear that the role of stewardship is an area in development and, as the various initiatives continue to progress, one that will help to drive forward ESG targets for pension schemes.