Pensions Minister Guy Opperman has praised the publication of a new guide from the Pensions and Lifetime Savings Association on environmental, social and governance (ESG) issues.

The guide precedes new ESG, climate change and stewardship requirements affecting pension funds trustees come in on 1 October 2019. Schemes will need to consider long-term risks and opportunities of ESG factors in their investments.

On the guide, Opperman said it is “helping in setting out how trustees can explore, articulate, and reach a consensus on their views of the extent to which ESG, climate change and stewardship factors are priced into the market”.

“It not only sets an expectation that all schemes have a responsibility here. It also highlights actions that all schemes, whatever their resources or capacity, can do,” he added.
The new guide features myth-busters, case studies and questions that trustees should be asking of themselves, their advisers and their asset managers, ESG and Stewardship: A practical guide to trustee duties approaches the regulations in a highly practical way so that trustees can implement policies straightforwardly.

Under the new requirements introduced by the Department of Work and Pensions, if trustees disregard long-term financial risks or opportunities from ESG, climate change and stewardship factors, they will need to justify why this does not harm investment returns or outcomes for their members.

The guide is designed to support trustees of around 30,000 DB and DC pension schemes responsible for managing nearly £2trn. It is structured to reflect the typical journey that trustees take to ensure that ESG, climate change and stewardship factors are properly understood, formalised in a relevant policy and, where appropriate, reflected in broader decision-making.

Developed by a cross-industry taskforce in response to significant demand from the PLSA membership, the new guide coincides with pension schemes’ summer trustee meetings and complements further guidance to be published by The Pension Regulator.

Commenting, PLSA policy board member and chair of the ESG taskforce, Brian Henderson, said: “For many pension schemes, ESG factors are already central to risk management and investment decisions. However, not all schemes are moving at the same pace. The ESG Guidance should have something for all trustees; ranging from those schemes that are early in their journey looking for guidance to those already implementing their agreed policies and beliefs.”

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