PLSA ESG 22: Govt preparing to regulate on ESG consistency

The government is preparing to regulate to achieve consistency on ESG across the private sector, according to All-Party Parliamentary Group (APPG) for ESG chair, Alexander Stafford MP.

Addressing the PLSA ESG Conference 2022, Stafford stated that work was currently being done by the Department for Work and Pensions (DWP) and the Treasury to harmonise common reporting standards.

“In an ideal world, we will see a narrow range of common reporting standards globally,” he said.

“Interestingly, ministers have made it clear to me that the government is preparing to regulate in order to achieve consistency on ESG across the private sector.”

Stafford announced that the APPG for ESG is going to launch a report next week titled: Recommendations on standardising and regulating ESG performance assessments and impact in the UK, which will feed into the government’s process on harmonising reporting standards.

“A common set of metrics will allow pension fund managers to make better impact investment decisions, and in turn pension funds should no longer be allowed to label investments as impactful if they don’t measure up to the metrics,” he continued.

“The metrics should be clear and unambiguous, with measurement against them taking place annually and a duty placed in advance to explain the ESG investment scores transparently to the consumer after each annual assessment.

“The APPG is not coming up with those set of metrics, but rather it is investigating which ones are pushing ahead to see if we, as parliamentarians, should be backing any one in particular.”

It is “paramount” that the work includes impact from the “big players” in the ESG world, Stafford noted, including institutional investors, pension schemes and consultancies.

He also called for legislation to clarify that trustee fiduciary duty includes the consideration of alignment with the interests of scheme members in terms of wider society and the environment, including a recommendation that all investments are considers through the lens of risk/return impact.

“It’s the joint responsibility of the government and the industry to bring everyone along with us,” he concluded.

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