Government regulations requiring pension scheme trustees to disclose their environmental, social and governance (ESG) policies have been a "game-changer", according to the pensions minister.
Speaking at the Association of British Insurers’ (ABI) conference on long-term saving yesterday (May 3), Guy Opperman, minister for pensions and financial inclusion, said that pension and investment managers must "do the right thing" and take their environmental and social responsibilities seriously to combat climate change.
From October 2019 pension schemes – both defined benefit and defined contribution - with more than 100 members will be forced to disclose the risks of their investments, including the ones arising from ESG considerations.
Mr Opperman praised these regulations saying that these policies have been a "game changer and focused minds".
He said: "The financial risks from climate change are too important to ignore.
"Many pension schemes are doing the right thing by tilting portfolios towards renewables or away from fossil fuels, and by engaging much more forcefully with investment firms who fail to take environmental and social issues seriously."
He added: "Pension schemes can identify investment opportunities which will make market-beating returns for members as we move to a low-carbon economy.
"They ought to be thinking about the assets which help drive new investment in important sectors of the economy: smaller and medium firms, housing, green energy projects and other infrastructure which deliver the sustainable employment, communities and environments which all of us wish to enjoy."
Last week (May 30) the Association of Member Nominated Trustees (AMNT) issued a formal complaint to the Financial Conduct Authority over the failure of asset managers to allow pension scheme trustees to choose which companies they invest in.
In particular the AMNT complained that asset managers do not allow pension scheme trustees to operate a stewardship policy for the environmental, social and governance (ESG) of the companies in which they invest in via fund managers.
The AMNT compared public voting policies on issues such as climate change, ethnic diversity and executive pay of 42 asset managers between February and May 2018.
Regarding climate change, it found that four out of the 42 managers did not publicly disclose their voting policy and 20 did not refer to climate change at all.
Three managers who referred to climate change had no voting guidelines, therefore failed to set out how they would vote at an AGM.
Mr Opperman said: "It’s utterly unacceptable that most pension fund managers don’t have published policies and practices to combat climate change, and public commitments to tackle excessive pay and promote gender and ethnic diversity are all too rare.
"Being vague or secretive with the trustees and savers they represent is out of order. These obstructive fund managers need to take action now as effective and responsible shareholders."
amy.austin@ft.com
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