Retirement plan trustees should demand that their money managers file more resolutions on climate change and improve disclosure related to climate for their strategies, the U.K. minister for pensions and financial inclusion said Tuesday.
Speaking at the Pensions and Lifetime Savings Association's annual investment conference, held virtually due to the ongoing pandemic, Guy Opperman said the U.K. government will implement further regulations by October to clarify how portfolios should be aligned with the Task Force on Climate-related Financial Disclosures standards. The clarifications will fall under the recently adopted Pension Schemes Act 2021.
The government wants to implement these requirements before the United Nations' Climate Change conference, known as COP26, which will be held in November in Glasgow, Scotland.
Mr. Opperman also called out managers for filing too few climate change resolutions, noting that some of them have never filed any resolutions.
He called on trustees to demand change where voting policies are weak and take voting policies into consideration when selecting money managers. "The bottom line is engagement is not enough," he said.
Mr. Opperman also said he didn't support divestment. Divestment "is utterly the wrong way forward," he said. "You don't end your savers' exposure by selling the stock to someone else and passing the problem on." He also urged trustees to improve their own stewardship practices.
Also on Tuesday, the Principles for Responsible Investment outlined effective voting practices in new guidance. Investors can strengthen their engagement efforts by publicly disclosing voting principles and intentions as well as giving clarity to companies on their position on key ESG issues. The PRI also said investors should support resolutions that are consistent with their voting principles by showing support for good corporate practices, and advising corporate leaders of their expectations.
Mr. Opperman separately addressed improving disclosure. He said managers need to start devoting more resources to measuring and reporting on the strategies that they sell.
"The data that trustees receive … needs to get better. That's quite clear," he said, adding that money managers cannot "ask clients to wait another five years."
Mr. Opperman also encouraged DC plans to invest outside of traditional equities and bonds, expanding further into illiquid asset classes. He cited the U.K. spring budget announcement March 3 when Rishi Sunak, chancellor of the exchequer, said the government is committed to revisiting rules regarding the way fees paid by defined contribution plans are calculated to facilitate such investment.