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Defined Contribution

U.K. drops proposed rule for DC plan trustees to disclose ESG statement

Trustees of U.K. defined contribution plans will not be required to prepare a separate statement on their participants' views on responsible investment, the government said Tuesday in a response to a consultation.

The government removed a proposed requirement for trustees and replaced it with an optional disclosure of their non-financial, social and environmental policy.

By clarifying investment duties of trustees in charge of DC plans that are to apply starting Oct. 1, 2019, the government also said DC plan trustees will need to declare and specify the investment horizon that is appropriate for their participants when disclosing policy on financially material considerations.

"We have (also) extended the stewardship requirement to require trustees of plans with 100 or more participants to disclose the policy in relation to the stewardship of the investments in the default (option)," the government said. However, the government added, it will not compel trustees to state a separate policy in relation to social impact investment.

Instead, trustees will be required to publish a statement of investment principles and include an online link to the investment policy in the annual benefit statement that is sent to plan participants. These reports will also explain any changes trustees made to the investments and how trustees communicated these changes to the plan participants.

"These measures are not intended to give any support to campaign groups for boycotts of certain countries or divestment from certain assets. Trustees have primacy in investment decisions, and their prime focus is to deliver a return to (participants). Whilst they should not necessarily rule out the ability to take account of (participants') views, they are never obliged to do so," the government said.

"Where the concerns are not financially material (such as primarily ethical factors), trustees are only permitted to take these concerns into account when there is a broad consensus. Where an investment issue is contested, as divestment from fossil fuels or from some regimes will generally be, the trustees should focus exclusively on financially material risks and opportunities, rather than seek to weigh up the relative strengths of views," the statement added.