The Investment Consultants Sustainability Working Group (ICSWG) has launched a guide to support pension trustees in assessing their investment consultants on climate competency and help raise investment consultants' standards.

The guide has set out out five competency themes under which trustees should expect their investment consultants to demonstrate their capability.

These are: firm-wide climate expertise and commitment, individual consultant climate expertise, tools and software to support climate-related risk assessment and monitoring, thought leadership and policy advocacy, and the assessment of, and engagement with, investment managers.

Positive and negative indicators have been outlined for each competency theme to help trustees assess their consultants in each area, with having a database of climate metrics for investments being listed as one such positive indicator under tools and software.

Willis Towers Watson global head of research and ICSWG co-chair, Luba Nikulina, clarified that the indicators are "deliberately stretching" in the hopes of raising investment consultants’ standards, also acknowledging that some of these indicators will be "aspirational".

"However, this is an important step towards developing good practice and practical guidance for schemes, in particular those seeking to align with the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD)," she added.

The group, which is a collaboration between 17 firms formed in 2020, also received input for the guide from ShareAction, The Pensions Regulator, and the Principles for Responsible Investing (PRI),

In addition to this, Barnett Waddingham policy and strategy lead and ICSWG Stewardship team lead, Amanda Latham, confirmed that the group will be engaging further with industry, with updates expected later this year.

She stated: “This guide represents a powerful example of what can be achieved through a collective commitment to improvement and collaboration in the delivery of meaningful change.

"But, it doesn’t end here. We will be engaging with trustees, regulators and action groups, to measure the impact of the guide and will share progress later this year.”

The guide is a practical response to the 2020 Pensions Climate Risk Industry Group (PCRIG) consultation, which recommended that pension scheme trustees require their investment consultants and asset managers to demonstrate climate competence.

It also comes amid government confirmation that large pension schemes,
those with more than £5bn in assets and authorised mater trusts, will face new climate risk governance and reporting requirements.

Commenting on the launch, LCP partner and ICSWG Regulation team, Ian Gamon, stated: “Climate change is fast becoming the defining issue of our time and trustees of pension schemes need to know their advisers are on the front-foot with this issue.

"We are really pleased to be publishing this new guide to give trustees a practical way to assess the capabilities and approach of their investment consultants on climate change.”

Mercer partner and director of consulting and ICSWG Regulation team member, Brian Henderson, added: “We are pleased to have developed the climate competency framework to help deliver better outcomes for our clients.

"The framework illustrates areas where clients can hold consultants to account in terms of their competency in supporting evidence-based climate change related decisions.

"It is important that pension scheme trustees ask their consultants and asset managers to demonstrate a best practice approach to climate competence.

"We are already in the decade of transition and to deliver returns for our clients we need to understand the risks and opportunities that the transition will bring.

"The framework is a step in the right direction and we look forward to the value it will add to our industry.”

The member firms of the group are Aon, Barnett Waddingham, bfinance, Buck, Cambridge Associates, Cardano, Hymans Robertson, ISIO, LCP, Mercer, MJ Hudson Allenbridge, Momentum, Redington, River and Mercantile, SEI, Willis Towers Watson, XPS Investment.

Share Story: