ESG and climate change

Environmental, Social and corporate Governance (ESG) factors in pension scheme investing continue to dominate headlines and trustee duties.

As we look forward into 2020, pension trustees are facing continued regulatory developments and new deadlines, as well as an increasing impetus to consider the potential impact of the climate crisis on their investments.

We have been advising on trustees’ legal duties with regard to financial and non-financial factors, including ESG, ‘socially responsible investing’ and ‘ethical’, ‘impact’ or ‘green’ investing for a number of years, and our experts are at the forefront of the debate. Sackers is also proud to have played a key part in devising new guidance for pension trustees on managing and reporting climate risks. The consultation by the Pensions Climate Risk Industry Group (PCRIG), which is chaired by partner Stuart O’Brien, was launched on 12 March 2020 at the PLSA Investment Conference. You can find details of the consultation here.

Our new guide for 2020, ESG and climate change for pension funds, considers how trustees should respond to the latest regulatory requirements. These include the deadlines for the second round of SIP updates following SRD II, as well as the new requirement for trustees to publish annual “implementation statements” setting out how trustee ESG and stewardship policies have been followed during the year. These changes affect both DB and DC schemes, and dates may vary according to the scheme year. Download our sample timeline for 2020 and beyond for details.

With climate change firmly under the spotlight, our guide also looks at where pension trustees’ fiduciary duties fit in and, in particular, how to integrate the consideration of climate-related risks into trustee decision making. In addition, we focus on stewardship in light of updates to the FRC’s Stewardship Code and how ESG and climate change issues should be considered in DC schemes, including by master trusts and IGCs. The guide also includes an action plan for trustees. This looks at what trustees might do to better integrate ESG factors into their decision making, both for those who are just getting started and those who want to take it to the next level. Download this below.

Read our earlier guides, ESG and climate change, Where next for ESG? and A practical approach to ESG, for a look at how trustee duties have evolved.

How we can help

We advise on the development and implementation of ESG strategies consistent with trustee fiduciary duties and the development of trustee ESG and engagement policies and climate-risk integration, including how to document trustee responsible investment policies and related wording for a scheme’s SIP and annual implementation statements. We also provide ESG training for trustees and pension scheme providers.

Recent experience

  • Advising a large UK pension scheme on development and implementation of ESG strategy in relation to their DC default fund
  • Advising trustees on how to incorporate ESG in to their Statement of Investment Principles (SIP) and updating their policies to ensure compliance with updated regulations
  • Assisting 7 of the 25 largest UK DB pension schemes with their responses to letters from the Environmental Audit Committee
  • Delivering training on fiduciary duties and ESG factors to a number of pension scheme trustees and providers
  • Advising a social investment group on issues for DC funds investing in socially responsible funds to inform their response to the 2016 Law Commission consultation
  • Assisting prominent schemes in responding to member / pressure group queries.