Industry view – UK Sustainable Investment & Finance Association


investment policies to be scrutinised. The DWP has agreed.


Charlene Cranny is communications and campaigns director of the UK Sustainable Investment & Finance Association (UKSIF)


ESG: ACCEPTING


RESPONSIBILITY AND THE MOVE TO REGENERATION


When I wrote almost two years ago (Not a nice to do: sustainable investing and the law, April 2019), the message was simply for UK pension trustees to understand the legal obligation to consider financially material environmental, social and gov- ernance (ESG) factors when investing. A lot has moved on since. The Department for Work & Pensions (DWP) offered clarity on the significance of ESG risk in 2018. They updated regula- tion to ensure pension schemes state their policy on managing ESG risk in their statement of investment principles (SIP) and publish it on a website. Since October 2020, defined contribution (DC) schemes have had to state how they have implemented the policy. A January 2020 UKSIF review of the SIPs found that policies are “vague and non-committal, and many have not even published their policies - despite their legal obligation to do so”. UKSIF recom- mended, amongst other things, a cen- tral SIP register to allow schemes’


Voting is being democratised The DWP ‘ESG regulations’ also intro- duced the requirement for schemes to disclose a policy on stewardship and how they exercise voting rights. To support smaller schemes finding it difficult to use their voice, the Association of Member Nominated Trustees (AMNT) made some recommendations to help bring “share- holder voting into the 21st century”. This led to the pensions minister setting up a working group to explore barriers to vot- ing, led by Simon Howard, an ex-UKSIF CEO. At the saver level, Tumelo provides schemes with the technology needed to enable individuals to cast a vote. Many forces are helping to democratise and normalise voting. The industry must pre- pare for this too.


Reporting seeks double materiality After slow take-up of the 2015 recom- mendations put forward by the Task Force on Climate-related Financial Dis- closures (TCFD) the UK has announced its intention to make such disclosures mandatory across the economy by 2025. The UK is also likely to align with new EU sustainability reporting standards which embed ‘double materiality’ – the requirement to seek financial and sus- tainability outcomes. An approach also being considered by the IFRS (Interna- tional Financial Reporting Standards). Tech innovation will be needed to col- lect all this new data easily and quickly “not on how much less bad companies are, but on how much more good they


are”, as writer and consultant B. Lor- raine Smith put it.


Regenerative capitalism is the goal ESG risk management without sustaina- bility targets and stewardship does not help to transition the economy to one that is more resilient or regenerative. Regen- erative capitalism is what think tank Vol- ans describes as “economic activity [that] works in the service of a just and inclusive society while restoring and protecting ecosystems”. It is the essential next phase if we are to restore global health and long- term prosperity for savers and the whole of society. We are en route and UKSIF will soon lay out its vision to support UK industry stay ahead. We cannot delay giving proper attention to ESG and sustaina- bility plans any longer. So let us know how we can help.


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Publisher John Waterson


j.waterson@portfolio-institutional.co.uk


Head of sales Clarissa Huber


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Head of roundtables Mary Brocklebank m.brocklebank@portfolio-institutional.co.uk


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10 | portfolio institutional | February 2021 | issue 100


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