Pensions industry urged to consider ESG factors equally and together

The pensions industry has been urged to consider environmental, social and governance (ESG) factors “equally and together”.

During a session at the PLSA ESG Conference 2021, Standard Life head of unit linked investment solutions, Gareth Trainor, noted that some in the industry were just focusing on the environmental side, but that it was “essential” to also consider the social and governance sides.

“We know from our research that the environmental side of ESG is the most familiar, easy to understand and most tangible of the three areas for customers,” he stated.

“Considering climate change and investment repeatedly tops the bill in terms of responsible investment priorities for customers.

“But it’s not all about the environmental side, our customers are telling us that human rights come a close second in the top responsible investment issues, and that the treatment of employees, suppliers and local communities matter to them.

“We are starting to see that, when it comes to public perception, the E, S and G matter equally.”

Trainor added that although environmental factors were “front of mind” for most people, ESG should be looked at holistically.

During the session, Standard Life Master Trust trustee director, Caroline Escott, highlighted the importance of having a well-governed responsible investment approach.

“As with the corporate governance piece, having that really robust trustee culture, set of investment beliefs, and setting the tone from the top when it comes to purpose and mission is vital for a well-governed responsible investment approach,” she stated.

“Having a diverse mix of voices around the trustee table is as important for the scheme governance as it is for the corporate tables of companies we invest in.”

Trainor concluded: "All areas of ESG matter equally. We need to consider them together and from a financial perspective, and find a balance between financially-material risks versus any kind of ethical questions.

“An ESG strategy is only as good as our ability to govern it and having trustees and governance structure in place that is clear on an ESG vision and purpose will ultimately be more successful.”

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