Trustees can improve ESG achievement with 8 extra hours a year

Trustees devoting eight additional hours per year to climate action and long-term stewardship could be the key to achieving “real progress” on these issues, according to Willis Towers Watson (WTW).

The advisory firm said it had analysed typical trustee investment meetings and concluded that the environmental, social and governance (ESG) priorities could be improved by dedicating two extra hours each to training, ESG strategy, portfolio review and ESG monitoring.

With climate action, WTW said significant progress could be realistically achieved by all UK pension schemes by quantifying climate risks, identifying climate opportunities and implementing a carbon journey plan.

For long-term stewardship, the firm recommended that trustees should use the extra time to set clear stewardship policies, review investment managers’ corporate engagement activities and review investment managers’ voting records on key ESG issues.

WTW head of UK investment advisory services, David Aleppo, commented: “Acronyms are only useful if they spur action – and that applies to well-meaning ESG intentions too. We believe that trustees’ time is one of the most valuable levers available for bringing about lasting change. Reimagining the agenda of trustee meetings could unlock real ESG action by focusing on practical priorities.

“Two priorities will never be enough but they can be a vital first step. Underplaying climate change is a financial risk which must be reflected in trustees’ decision making. Trustees should maintain a long-term focus and ensure that their asset managers do the same.

“Trustees’ stewardship roles can be a powerful mechanism for positive change in the investment industry. We see these two agenda items as a way for trustees to begin turning ESG aspirations into ESG action without significant time commitment.

“Increasingly, our most successful work with pension schemes has involved both a review of portfolios and also a review of trustees’ own highly valuable time.”

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