ESG in pension investments

Trustees, employers and members are increasingly recognising the financial risk associated with holding investments that do not appropriately integrate ESG factors, as well as the potential positive risk adjusted returns achievable by holding investments that have integrated such factors.

We are seeing increasing pressure on employers with contract based schemes and Trustees to ensure that pension investments reflect stated ESG ambitions.

From conversations with our clients, it is clear that there is a desire for more to be done with investing pensions sustainably. However, lack of information and time are key barriers meaning it often appears easier to adopt a “minimum compliance” approach.

ESG and sustainable investment is a specialism in its own right. We believe that Trustees and Employers should have Pensions ESG advisors alongside their traditional teams. The benefits are as follows:

Increased clarity. Access specialist advice from experts with sustainability as a day job. This will enable you to better understand and manage the ESG risks and opportunities in respect of your pension arrangements.
Additional line of defence. Receive independent assurance that your scheme is aligned with all of your ESG beliefs.
Higher bandwidth. Emerging ESG requirements only make the process of managing pension arrangements more complex. Specialist advisers reduce the need for management focus whilst having comfort that the sustainability agenda is in capable hands and increase efficiency of decision-making.

Assessing clients' growth asset portfolios often shows that only a fraction of assets are covered by a sustainability policy. We help clients understand the real world impact of this, and can support in facilitating a change to their pension provider or investment strategy to ensure their sustainability objectives are being met.