PA Autumn Conference: Opperman 'disappointed' by low stewardship action

Pensions Minister, Guy Opperman, has said that he is “broadly disappointed” by the low levels of action on stewardship by pension schemes, emphasising that there is still more for the industry to do to combat climate change.

Speaking at the Pensions Age Autumn Conference 2021, Opperman warned that there is a misconception that stewardship is not a key part of the trustee work and that “this kind of attitude must change” in order to create sustainable outcomes for members.

"We've taken huge strides in showing the UK pension sector is leading the world on the climate agenda," he said.

"However, there is more that we can and will do. The stark warning given by the International Panel on Climate Change makes it vital for pension schemes to turn the dial on stewardship and create long-term value for savers."

The minister also pointed out that the Department for Work and Pensions (DWP) launched the Occupational Pension Stewardship Council in July in order "to accelerate progress on stewardship".

“Later this year, the Taskforce on Pension Scheme Voting Implementation will publish recommendations intended to improve pension voting systems," he confirmed. "The Stewardship Council, working closely with this taskforce, will be able to use their collective power to improve stewardship across the industry."

However, Opperman also attributed the low level of stewardship action, in part, to the UK’s “fragmented pension system with differing levels of governance", stating that the government is seeking to address this through greater consolidation.

Commenting on this topic further, he confirmed that the government is currently reviewing all feedback from its recent call for evidence on the future of the DC market, which sought views on proposals to drive further consolidation, and will set out next steps “shortly”.

"Consolidation of the market into fewer, larger scheme is what I believe we should be striving for," he said.

"And I'm pleased that the early indications suggest that there is broad agreement that scheme consolidation can improve governance, introduce economies of scale, and facilitate access to wider investment opportunities, all of which can drive better member outcomes."

In addition to this, Opperman shared early analysis of the responses received during the DWP's call for evidence into the financially material social risks and opportunities pension schemes are exposed to.

“Firstly, they are clearly interconnected,” he said, continuing: “Some pension schemes have policies on climate change, which refer explicitly to social and governance factors.

“This makes sense. We cannot contemplate a low-carbon economy without also thinking about green jobs and housing. This holistic approach is key to pension scheme, managing financials material risks.

“Secondly, the term social is wide ranging, covering working conditions, health, and more, which makes it hard for schemes to access the data needed to manage financially material risks, and the opportunities.

“Thirdly, the responses to the social call for evidence helped give more clarity on which social risk industry are already prioritising, modern slavery in particular is important to schemes. So it makes sense to investigate this further.”

The minister also commented on the Prime Minister and Chancellor’s challenge for institutional investors to create a “investment big bang”, which identified defined benefit superfunds as one means to deliver this.

“I fully support this view, and I will continue to work to bring forward a permanent regime, very shortly,” he confirmed.

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