SPP publishes ESG integration guide for trustees

The Society of Pension Professionals (SPP) has developed a framework for trustees to monitor their obligations as part of a new environmental, social and governance (ESG) guide.

The step-by-step guide advises trustees to first establish how their schemes' investments are held, trustees’ legal obligations and a future framework for them to adopt consideration of ESG factors.

It noted that schemes might want to take different approaches to ESG integration based on whether they are passive pooled funds, active pooled funds or active segregated funds.

Then, the guide examines how to move forwards with ESG integration while adhering to trustee obligations to invest assets in the best interests of members and beneficiaries, while also adhering to a scheme’s published ESG policy.

Finally, the suggested framework argued that trustees should first focus on setting beliefs and objectives, before applying these to the scheme’s investment strategy.

It recommended engaging with advisers and investment managers in order to receive proper training and to ensure that managers have things in place, such as a systematic approach that enables an explanation as to how ESG factors are considered in the investment process.

Beyond this, the framework advised trustees to remain aware of upcoming developments that might affect ESG integration, noting that the remaining months of 2021 will see the introduction of further legal, regulatory and practical developments from the Department for Work and Pensions, The Pensions Regulator and the Pensions and Lifetime Savings Association.

Pensions Minister, Guy Opperman, commented: “I applaud the SPP for producing this very short introduction. It shows trustees how to get started and highlights the common pitfalls to look out for. ESG is a journey, and I strongly recommend this guidance for schemes who are still in the early stages.”

SPP president, James Riley, said: “Meeting their ESG obligations can seem daunting for pension scheme trustees. This is particularly true for trustees of small to medium sized schemes with smaller budgets and which are predominantly invested in pooled funds, who believe their options for action are limited.

“This SPP guide is aimed at the trustees of such schemes. It seeks to give them high level guidance on their legal obligations, what actions they can practically take depending on their investment structure, and how best to engage with advisers and investment managers. We hope that it provides practical support in navigating this ever more complex and regulated area.”

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