The UK Sustainable Investment and Finance Association (UKSIF) and several asset owners have called for policymakers to consider providing greater clarification of fiduciary duty for pension scheme trustees.

They stated that there was a level of inconsistency in the interpretation and depth of understanding across pension schemes regarding the extent to which environmental, social and governance (ESG) factors and impacts should be addressed and interpreted within trustees’ fiduciary duties.

UKSIF and several of its asset owner members, such as Brunel Pension Partnership, Nest and Phoenix Group, noted that the updated Green Finance Strategy stated that the government will engage with stakeholders on clarifying fiduciary duty.

They said that the government could provide schemes with clearer expectation of how much they can and should take account of sustainability impacts, social and other sustainability considerations though guidance and ongoing support.

The association and asset owners believed this could help reduce the confusion and inconsistency in this area.

UKSIF recommended that relevant government departments and regulators issue guidance for UK occupational pension schemes on a statutory or non-statutory basis.

It believed that factoring in financially material ESG issues, and actively managing associated risks and impacts, is consistent with fiduciary duties, and that this clarification would make this clear across the market.

“We continue to see some hesitancy in parts of the UK’s pension sector and the wider industry over what sustainability factors and particularly impacts can or should be taken into account on behalf of beneficiaries,” commented UKSIF chief executive, James Alexander.

“We have seen this particularly with the inclusion of social factors which we believe are crucial to consider in the long-term performance of companies, portfolios and economies.

“This is why we believe that it is vital the government puts out industry guidance on fiduciary duties, providing schemes with the support and guidance needed on the ESG risks and impacts they should already be considering when making investment decisions.”

UKSIF government affairs and policy manager, Heidi Douglas-Osborn, added: “We believe that guidance would be a great support to the industry and are excited to have the endorsement of leading asset owners.

“This guidance would not only provide a clearer direction for pension scheme trustees but help the UK move toward its net-zero goals and support a long-term sustainable finance system.

“While we do not think that substantive changes are necessarily needed to the law, the core issue we identify is around interpretation of fiduciary duty and we would like to better support trustees and others to help fulfil these duties.”

Share Story: