Govt strengthens support for trustees on social impact investing

Written by Theo Andrew

The government has increased its support for trustees around social impact investing and aspires to schemes targeting a “minimum percentage allocation” towards green investments.

In its response to the Advisory Group’s report, A Growing Culture of Social Impact Investing in the UK, published today, 12 June 2018, the government said it would like members views to be “more seriously considered" and that it will work with regulators to explore news ideas.

The response to the report is one of many initiatives being considered at the moment, alongside its response to the Law Commission and the recommendations made by the Green Finance Taskforce in its Accelerating Green Finance report.

The government said: “Departments will consider, at ministerial level, what more can be done to increase consideration of the wider impacts of pension investments – environmental and social, as well as financial.

“For example, government has an aspiration that pension schemes could, if they chose to, target a minimum percentage allocation towards investments that have an explicit social or environmental purpose, and report on that.

“Government would also like to see member views much more seriously considered in pension investment decisions.”

One of the issues it is looking to consult on is to clarify the way pension schemes engage with the firms in which they invest as an “important aspect of stewardship”.

Furthermore, the government will consult on changes to regulation to allow for consideration of broader financial risks and opportunities over environmental, social and governance (ESG) issues and clarify the various ways pension schemes should engage with the firms in which they invest.

In regards to improving regulation, the government added that it has opened dialogue with the Financial Conduct Authority (FCA), The Pensions Regulator (TPR) and the Financial Ombudsman Service (FOS), on how social impact investing can become “business as usual” for the British economy.

It also praised the FCA’s “proactive engagement” with the sustainable finance sector, and asked if it could work on reducing the “perceived barriers of growth” to the market.

Pensions and Lifetime Savings Association policy lead for investment and defined benefit, Caroline Escott, said: “We are pleased to see the government committing to support this initiative, and championing businesses and industries that excel in social impact investing.

“With their long-term investment goals and £2.2trn of assets under management, pension schemes are particularly well placed to have a positive impact on the economy and society through their investments.

“It’s encouraging the government is focused on supporting trustees in considering the broader environmental and social impacts of their investments."

The Department for Work and Pensions consultation on rules around ESG investment will start next week.

Last month, it emerged that some of the UK’s largest pension funds have been branded “worryingly complacent” on climate change for failing to consider it in their investment strategies, with Ford Pension Fund and BP Pension Scheme fairing worst.

Yesterday, Share Action revealed that six out of nine of the UK’s largest auto-enrolment pension providers do not have policies in place to prevent from investments in companies that profit from chemical and biological weapons.

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