DB schemes increasing focus on ESG factors in de-risking decisions

Defined benefit (DB) pension schemes are increasingly taking environmental, social and governance (ESG) considerations into account in buy-in decisions, Hymans Robertson has stated.

ESG considerations are being given this additional focus due to increasing environmental expectation of members, the consultancy noted.

With buy-ins becoming a more likely outcome for DB pension schemes, and growth in this area looking set to continue, the importance of ESG has “never been greater for risk transfer”.

The results of polling at a recent webinar held by the firm supported this, as nearly two-thirds of trustees (62 per cent) said that they were willing to pay a higher buy-in premium in return for an insurer with better ESG credentials.

This insurer scrutiny looks set to continue as they begin to comply with new FCA rules to make climate-related disclosures consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

Hymans Robertson head of ESG for risk transfer, Paul Hewitson, commented: “The scale of investment within ESG presents a huge opportunity for the risk transfer market which can materially improve its position within this area and create real change.

“The willingness of insurers to move towards investing in a greener way must be recognised and this will benefit both pension scheme members and our wider society.

“The indications from our webinar poll, finding that nearly two-thirds of trustees are willing to pay for better ESG credentials, demonstrates that there is a clear need for insurers to improve what they offer within this area and differentiate themselves in the marketplace.

“The importance of ESG will only continue to gain momentum and increase in importance to trustees, and the risk transfer market.”

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