The Pensions Policy Institute (PPI) has launched a research series aiming to identify practical ways to improve environmental, social and governance (ESG) engagement among trustees and contract-based scheme providers.

The series will explore the financial implications of ESG, climate change and stewardship, as well as exploring how schemes are approaching the consideration of these issues.

It will also work to highlight gaps in method and approach, and identify barriers and possible avenues to greater engagement.

The PPI is expected to publish an introductory briefing note on the research in late 2020, setting out the key developments in regulation, industry and global trends.

This will be followed by two full reports in 2021, exploring the schemes’ consideration of climate change and exploring ESG risk factors in greater depth.

The research will also include analysis of a new survey, which will gather evidence on trustee opinions and behaviour in relation to ESG.

Announcing the research series, the PPI highlighted a trend of increased regulation of ESG risk factors, which it argued looks "set to continue" following the launch of a government consultation on proposals to require the 100 largest occupational pension schemes to publish climate risk disclosures by the end of 2022.

It emphasised however, that despite regulatory changes to schemes’ obligations, there is a concern that not all schemes are engaging with these issues “in a meaningful way”.

The PPI acknowledged that whilst understanding among trustees has been increasing since the implementation of new regulations in October 2019, confusion remains around the financial materiality of ESG factors and how they should be integrated into investment strategies.

Furthermore, it argued that “even the very definition” of ESG is in question, given the “complexity and lack of consistency in language” seen across the industry.

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