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Environmental, Social & Governance (ESG) Report 2023
7 December 2023

Environmental, Social & Governance (ESG) Report 2023

The implementation of Environmental, Social and Governance (ESG) principles into the running of the UK’s pension schemes has now become well established.

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We are excited to extend an invitation to you to delve into our latest Environmental, Social, and Governance (ESG) report 2023.

The implementation of ESG principles into the running of the UK’s pension schemes has now become well established. To some extent, this has been driven by the requirement for pension schemes to comply with the Task Force on Climate-related Financial Disclosures (TCFD) reporting requirements, although it should be emphasised that there is far more to ESG than just considering the impact of climate change. Former Pensions Minister Guy Opperman was an enthusiastic proponent of ESG, and his successor Laura Trott took up the mantle during her period in office. It is worth reflecting on why ESG is so important for pension schemes and to assess what remains to be done.

We are now at a point where many pension schemes have integrated ESG factors into their investment decision-making processes. This involves considering ESG issues alongside traditional financial metrics when evaluating investment opportunities. In some cases, trustees work with their consultants to apply ESG screening to their investment portfolios. This involves excluding or including investments based on predefined ESG criteria. For example, trustees may choose to exclude companies involved in tobacco, weapons, or fossil fuels. Many trustees are also now more active in Corporate Governance. Trustees may now actively engage with companies in which they invest to encourage better ESG practices. This can include participating in shareholder votes on ESG-related issues and advocating for positive changes in corporate behaviour. There is an increasing emphasis on transparency and reporting regarding ESG practices. Pension schemes may disclose information about how they integrate ESG considerations, their voting practices, and the impact of ESG factors on their investment decisions. Crucially, trustees now understand that ESG is far more than a simple compliance exercise. Experience has shown that companies who have adopted an ethical approach to commercial activity are actually more profitable over the longer term, and that a commitment to ESG rewards trustees with a well-performing portfolio.

The PMI’s 2023 ESG report is an invaluable aid to trustees seeking to develop a long-term commitment to ESG and its effective implementation. A range of high-profile organisations have provided expert insight into issues to consider and methods for ensuring that ESG plays a prominent role in trustee decisions. The experts who have contributed to this report bring a wealth of experience and expertise, and the range of contributors ensures that ESG is addressed in a thorough manner. There is also consideration to the direction that future developments might take.

As new challenges for trustees arise - such as, for example, the implementation of the Mansion House Reforms – this is a crucial consideration. As ESG continues to play an increasingly important part in the stewardship of the UK’s pension schemes, it is vital that trustees have clear and effective guidance with regard to how their approach to governance needs to be adapted. This report will provide a perfect starting point.

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Last update: 6 December 2023

Tim Middleton
Tim Middleton
PMI
Director of Policy & Engagement
Barnett Waddingham
Cardano
Sackers
Schroders Solutions
Scottish Widows

De-Risking Transitions Manager

Salary: £70000 - £80000 pa

Location: Hertfordshire

Pensions Analyst

Salary: £30000 - £40000 pa

Location: Home-based with option of attending Hampshire or London offices as desired

Pension Administrator

Salary: £20000 - £40000 pa

Location: Glasgow

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