Defined benefit (DB) pension schemes are pulling ahead of scheme sponsors when it comes to making progress on environmental, social and governance (ESG) considerations, research from LawDeb has revealed.

The survey showed that both DB pension schemes and the sponsoring businesses behind them are relatively aligned in some key areas, as just over a third (34 per cent) of finance leaders surveyed think both the scheme and business are leaders in diversity ambitions.

However, around the same number (32 per cent) think the scheme is leading the way, while 27 per cent believe it’s their company pulling ahead, and 6 per cent think neither the scheme nor the business are leaders on diversity.

And this gaps widened in other areas of ESG, as the research found that 37 per cent of in-house finance leads admitted that the scheme is the leader on environmental targets, such as reducing the scheme’s carbon footprint and meeting net-zero ambitions.

In contrast, nearly half as many (21 per cent) think the business is leading the way, while 29 per cent believe the scheme and business are co-leads.

DB schemes also won the race on social considerations, as nearly two fifths (39 per cent) of finance leads acknowledged the scheme’s leadership in this area, while a further 37 per cent felt that their scheme was pulling ahead on governance expectations.

Whilst there was no area of ESG where more leaders think the business is pulling ahead, LawDeb found that legal and regulatory compliance are key strengths for businesses.

Indeed, the level of legal and regulatory compliance (91 per cent) and clarity of governance structure (90 per cent) were the areas where finance leaders judge their business’ capabilities most positively, demonstrating that companies are performing well when it comes to effective governance.

But there was still room for improvement when it came to green credentials, which received the lowest satisfaction score, with 83 per cent judging their business’ capabilities positively.

LawDeb highlighted this as evidence of a potential opportunity for businesses to further enhance their sustainability efforts, particularly in aligning environmental initiatives with growing stakeholder and member expectations.

“This research indicates that trustees have an opportunity to step up, and work with businesses and sponsors to enhance best practice and drive performance to improve member outcomes," LawDeb Pensions managing director, Sankar Mahalingham, said.

“It’s good that so many finance leaders feel able to play a significant role in improving how their schemes operate. However, it’s apparent that trustees are leading the way, and many firms have room for improvement.

"Finance leaders and executive boards at scheme sponsors are being pulled from pillar to post; so ESG factors are unlikely to currently be top of the priority list.

"It’s right that trustees - with more time and industry experience - are ensuring schemes are meeting their net-zero ambitions, having a positive social impact, and embedding good governance; we would expect them to be the driving force."

---