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12 consultants endorse Pensions Regulator stance on ESG

A group of 12 investment consultants is publicly backing guidance by the U.K. Pensions Regulator stating that retirement plans should take environmental, social and governance factors into account in investment portfolios.

The regulator said in guidance in March that most investments are exposed to long-term financial risks such as climate change and corporate governance. "We expect you to assess the financial materiality of these factors and to allow for them accordingly in the development and implementation of your investment strategy," said the regulator.

The 12 consultants, which include Mercer, Willis Towers Watson and Aon Hewitt, agreed to ensure their defined benefit and defined contribution clients are made aware of this guidance, said a joint news release by the Association of Member Nominated Trustees and the U.K. Sustainable Investment and Finance Association.

In a joint statement, group members stated the "recent investment guidance from The Pensions Regulator marks a major development in TPR's approach to how trust-based DC and DB pension schemes need to address risks around long-term sustainability, including environmental, social and governance issues."

The statement added the consultants view the regulator's statement as putting trustees and their advisers "under an obligation to react."

The consultants added they believe ESG to be "a fundamental part of success in long-term investing," and therefore are drawing the guidance to the attention of U.K. clients "through a variety of routes such as putting consideration of ESG on trustee meeting agendas, issuing briefings and/or holding training sessions. We also recognize the significant role that client-facing consultants can play in ensuring that our clients are well-informed on the issues."

The other nine consultants are Allenbridge, Barnett Waddingham, bfinance, Cardano, Hymans Robertson, JLT Employee Benefits, Lane Clark & Peacock, Quantum Advisory and Redington.

"The Pensions Regulator's guidance makes it clear that savers are entitled to have their money protected from visible threats such as climate change, and we hope that the commitment from leading investment consultants to brief and help clients will accelerate the process," said Simon Howard, CEO of UKSIF, an organization promoting sustainable and responsible investment.