PI Partnership – BlackRock artnership – PLSA


Karen Hurst is senior policy adviser for the PLSA


WHAT’S NEXT FOR THE S IN ESG?


When the Department for Work and Pen- sions launched a surprise call for evi- dence looking at the risks and opportuni- ties of the S in ESG earlier this year, it was a timely reminder that climate change alone will not, and should not, dominate the ESG debate in 2021. And it is not just the government that is taking an interest – 2021 has seen the impact of investors on high profile com- panies make the mainstream, and not just the financial, headlines. For instance, the recent floatation of Uber showed that investors are as concerned about the treat- ment of the workforce as they are about generating returns.


In our annual voting guidelines, pub- lished in March 2021, the PLSA urged shareholders to consider companies’ treatment of their workforce during the lockdown period. Did they prioritise the safety of the workforce above all else? Were they accepting government support for workforce pay whilst still seeking per- mission from stakeholders to increase executive pay? However, as we start to all look to what we hope to be a more normal life again, it is almost certainly the case that the events of the past year or so will result in a perma- nent change in our expectations of the workplace. There continues to be signifi- cant debate about returning to the office, with the needs of different groups of staff not necessarily aligned. The end of fur- loughing is likely to bring with it a range of challenges for companies impacted financially by lockdown. Add into the mix the growing scrutiny of investment in areas that have a poor human rights record, and it is clear that climate is not the only thing investors need to be think- ing about in 2021.


Of course, though the circumstances have changed, many of these issues are not new, and certainly not new to pension funds looking to invest responsibly. In the PLSA’s 2016 report Hidden Talent we found that PLSA members overwhelm- ingly looked at data in annual reports on


38 | portfolio institutional | June 2021 | issue 104


workforce stability, skills and capabilities, engagement and composition as evidence of the wider performance of the company. Despite this, we still found that disclosure was lacking – only 43% of companies dis- cussed their workforce as a source of value, for example. Less than half dis- cussed performance in relation to a meas- urable target.


There are already a number of initiatives to help members encourage companies they are invested in to improve this. Our ‘Worth of the Workforce’ Steward- ship toolkit, for example, recommended annual reports should be used to detail corporate culture and working practices in a narrative form, underpinned by con- sistent, concrete data on metrics such as diversity, staff turnover and investment in training. We have also supported the Workforce Disclosure Initiative, an inves- tor coalition aiming to collect comprehen- sive and consistent data to help with analysis. Given the continued focus, we are pleased to be launching another round of research, this time with the CIPD, High Pay Centre and RPMI Railpen, which will look at how disclosure has improved. Over the coming months we plan to revisit which metrics our members say they value and analyse how far FTSE com- panies actually report against them. We believe this work will be important not only in raising awareness of the need for comprehensive


reporting, but also to


ensure that the sector is able to demon- strate to policy makers where the gaps are and how they in turn can support the industry in ensuring that the ‘S’ in ESG is not forgotten. We look hope to be able to publish an update on this work later in 2021.


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