In January this year, with a desire to show transparency and accessibility when it comes to pension risk transfer, insurers with U.K. business signed up to the Sustainability Principles Charter to commit to ESG investments.
In collaboration with the architects of the charter, insurers committed to four guiding principles of transparency, decision-making, reporting and engagement, and collaboration.
The Sustainability Principles Charter was developed by Railpen, the steward of about £34 billion ($43.4 billion) in assets for the Railways Pension Scheme, London; the £3.3 billion Church of England Pensions Board, London; and Accounting for Sustainability, an entity established by King Charles III to make sustainability a business-as-usual effort.
“There was sometimes a disconnect between what pension schemes would want versus what insurers are able to deliver" in terms of sustainability, said Cleo Fitzsimons, head of sustainability at Pension Insurance Corporation, which is signatory to the charter and offered feedback to the working party during its drafting. "I think this charter is a really good opportunity to bridge some of that gap and demystify areas that are currently not as transparent as trustees would like.”
Important to Fitzsimons was that signatories are able to deliver on promises made and that the charter does not become a “badge-collecting exercise,” instead ensuring that the charter is an opportunity for insurers to display the capabilities they have in this area.
“A large majority of pension plans have a keen eye on sustainability," said Kunal Sood, managing director of defined benefit solutions and reinsurance at Standard Life — another insurer signatory to the charter. "We are also very proactively designing a set of principles around which ESG metrics, sustainability in particular, can be measured, and be used to influence decisions that impact the futures of pension plan members."
The Church of England Pension Plan’s reasoning behind the charter, as laid out in a news release by the fund, was that once pension funds pass over assets to insurers as part of a pension risk transfer deal, they have no say in or responsibility for how they’re invested, even though those are the assets that ultimately pay participants' benefits. In its words, “that’s far from ideal.”
Another insurer that is a signatory to the Sustainability Charter is Legal & General.
“When we're talking to trustee boards they want to understand what we are doing in the ESG space," John Towner, head of pension risk transfer at the firm, said. "What are our policies, how are we thinking about our investments, how are we thinking about our longer term commitments? We’re particularly proud of what we've done on this front, and we believe we are a leader, both in having brought the industry to this point and in moving it forward.”
Insurers that are signatories to the charter include Legal and General, PIC, Rothesay, Aviva, Standard Life, and Just Group. Further pension fund signatories include the Cancer Research U.K. Pension Scheme, London; HSBC Bank U.K. Pension Scheme, Lancing, England; Merseyside Pension Fund, Liverpool, England; and the National Grid Electricity Group Trustee, London.
