Twenty pension funds, insurers and advisers have signed up as founding signatories to the Sustainability Principles Charter, which aims to promote greater transparency, reporting and engagement around sustainability in the bulk annuity process.

The charter, launched today (30 January), was developed by Accounting for Sustainability (A4S), the Church of England Pensions Board and Railpen, and sets out four ‘guiding principles’ for the bulk annuity process.

These four guiding principles are: Transparency, decision making, reporting and engagement, and collaboration.

Among the 20 founding signatories were the six largest pension insurers: Legal and General, PIC, Rothesay, Aviva, Standard Life, and Just Group, alongside several pension schemes, advisers, and associations.

The charter was developed after an ‘extensive’ consultation process and provides guidance around the four key principles.

A4S director of capital markets, Kerry King, noted that many defined benefit (DB) schemes had made sustainability-related commitments to members.

“Pension schemes therefore require transparency during the bulk annuity process – before, during and after the point of transaction – on how the insurer considers these commitments and ensures the schemes’ assets will continue being resilient to the growing threats from climate change and other sustainability challenges,” she continued.

“In addition, insurers welcome guidance from pension schemes and their advisers as to the information that will be valued as part of the process.”

Church of England Pensions Board deputy chief responsible investment officer, Dr Stephen Barrie, commented: “By signing the charter, signatories are recognising the importance of transparency, embedding sustainability into decision making, ongoing reporting to members and/or trustees, and engagement across the sector as best practice evolves.

“Not only will it be a helpful guiding tool during the bulk annuity process, but it also means that we are all playing an active role in investing in a more sustainable world for members to retire into.”

Other signatories included LCP, with LCP partner, Charlie Finch, saying sustainability objectives were "critical" for protecting the health of the economy therefore and insurers’ ability to pay promised benefits, and the charter helped support the long-term security of members’ benefits, and Cardano, with Cardano managing director, Michael Bushnell, stating that the charter was an “essential first step” in helping trustees make decisions when it comes to the suitability and resilience of insurers as the counterparty for their members and scheme.

Hymans Robertson also signed up to the charter, and its head of ESG for risk transfer, Paul Hewitson, commented: “As more pension schemes reach the point where buyout is affordable, ESG considerations are becoming increasingly important in trustees’ selection criteria, when picking which insurer to transact with.

“This charter helps set expectations of the minimum requirements on sustainability, while also pushing insurers to do more, with clear examples of how they can differentiate themselves in a busy insurance market.”

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