Trustees must hold investment consultants to account over ESG

Trustees must hold investment consultants to account over environmental, social and governance (ESG) issues, the Association of Member Nominated Trustees (AMNT) has said.

In a joint report with the UK Sustainable Investment and Finance Association (UKSIF) published today, 14 December, both organisations highlighted consultants willingness to tackle ESG issues, but that they needed to be offering a “minimum service” for trustees.

The report, Holding Investment Consultants to Account: A guide for trustees, has urged trustees to conduct a skills analysis of their investment consultants to see if they fall below the minimum level, while consultants must act as soon as possible or “risk losing clients”.

In June 2017, AMNT and UKSIF engaged with the UK investment consultant industry, securing public commitments form 16 firms, around 85 per cent of the market, to share The Pensions Regulator’s ESG guidance to their clients.

Since then, the bodies said that progress has been “very encouraging”, with the majority of the consultants offering ESG training to clients, including ESG in board meeting packs and the expansion of ESG advice across fiduciary and actuarial services.

Despite this, few consultants offered numbers to “substantiate the scale” of their efforts.

AMNT co-chair, Janice Turner, said: “The investment consultants are key to enabling trustees to fulfil the new requirements. In our view, the new regulations, in effect, oblige any consultant of integrity to ensure their clients have the information and guidance in this regard that they should be entitled to expect from their professional adviser.”

According to the report, trustees should expect the development of trustee beliefs and polices related to the Statement of Investment Principles, regular training, integration across all asset classes and manager selection.

Furthermore, investment consultants should consider the quality of their internal governance around ESG, including a public transparency and accountability approach, regular training and regular evaluation.

Redington head of responsible investment, Honor Fell, said: “Advice on ESG is a key part of our core framework-based offering to pension clients. It is also an area where best practice and sophistication of advice is advancing rapidly - advances in data availability and the technology to make use of this data is underpinned by an increased regulatory emphasis.”

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