PLSA launches ESG guidance for pension fund trustees

The Pensions and Lifetime Savings Association (PLSA) has published a new guide to help pension fund trustees comply with new environmental, social and governance (ESG) requirements coming into force from 1 October and support them in achieving good practice into the future.

Using myth-busters, case studies and questions that trustees should be asking of themselves, their advisers and their asset managers, ESG and Stewardship: A Practical guide to Trustee Duties approaches the regulations in a highly practical way so that trustees can implement policies straightforwardly.

Guy Opperman, Minister for Pensions and Financial Inclusion, said: “This guide is particularly helpful in setting out how trustees can explore, articulate and reach a consensus on their views of the extent to which ESG, climate change and stewardship factors are priced into the market.” He added that the guide not only sets an expectation that all schemes have a responsibility, but it also highlights actions that all schemes, whatever their resources or capacity, can do.

Under the new requirements introduced by the Department for Work and Pensions, if trustees disregard long-term financial risks or opportunities from ESG, climate change and stewardship factors, they will need to justify why this does not harm investment returns or outcomes for their members.

The guide is designed to support trustees of around 30,000 defined benefit and defined contribution schemes responsible for managing nearly £2 trillion in assets. It is structured to reflect the typical journey that trustees take to ensure that ESG, climate change and stewardship factors are properly understood, formalised in a relevant policy and, where appropriate, reflected in broader decision-making.

Brian Henderson, chair of the ESG taskforce and PLSA policy board member, commented: “For many pension schemes, ESG factors are already central to risk management and investment decisions. However, not all schemes are moving at the same pace. The ESG Guidance should have something for all trustees; ranging from those schemes that are early in their journey looking for guidance to those already implementing their agreed policies and beliefs.”