PLSA launches ESG implementation guide for UK pensions

The Pensions and Lifetime Savings Association (PLSA) has published guidance to help pension trustees navigate new regulatory requirements around the public disclosure of their responsible investment activity.

The association’s Implementation Statement Guidance sets out how to tackle new duties from the Department for Work and Pensions (DWP), which require trustees to annually disclose how closely their scheme’s activity adhered to its ESG aims that were indicated in its Statement of Investment Principles (SIP).

Caroline Escott, senior policy lead for investment and stewardship at the PLSA, said as a new discipline for trustees, these statements would require them to carefully consider which investment decisions and activities have or will have the greatest impact on their investment objectives.

“We believe that well-crafted, relevant and interesting disclosures will add real value to beneficiaries in understanding their scheme’s investment approach, including their approach to ESG and stewardship issues,” she said.

As active participants in the PLSA’s expert group, which worked to shape the guide, Minerva welcomed its publication.

“This is a once in a generation shift in legal responsibilities for pension trustees,” said Minerva founder and CEO Sarah Wilson. “We were delighted to have been asked to help the PLSA with the development of this important resource, which explains how pension schemes can comply with the rules.”

After more than 20 years operating in the fields of stewardship and proxy voting, Minerva is also delighted to see the DWP recognise and enshrine in law the importance of these issues, “specifically for schemes to regularly review how their investment managers are exercising their voting rights with investee companies on behalf of scheme beneficiaries,” said Wilson.

The guidance shows trustees how to navigate the requirements, which are different for each type of scheme.

For example, DC/hybrid schemes are required to disclose against all parts of their SIP, while DB-only schemes are required only to disclose on their voting and engagement behaviour.

The step-by-step guide sets out what the legislation requires trustees produce and by when, outlining both general principles and more detailed considerations they could employ to produce valuable statements.

It also highlights the specific considerations around voting behaviour disclosures, along with “top tips” for general and responsible investment communications.

From planning the Implementation Statement to producing it, the PLSA’s 40-page document walks trustees through the requirements. However, it also encourages them to think about the future and potential increase in the use of technology to communicate with members.

It reminds trustees that what constitutes best practice on investment disclosures, which includes the Implementation Statement, will rapidly change as the market develops.

“We recognise that each scheme will need to take the approach that best suits its resource and governance capacity,” said Laura Myers, PLSA working group chair and policy board member. “We are also conscious that this is a very new area for trustees and what good practice looks like will evolve over time.”

She added: “We expect that this guide will need to be updated as markets evolve and as the concepts of good and best practice change but hope that this provides a starting point for schemes of all shapes and sizes.”

The guide is available from the PLSA’s website.

Last Updated: 31 July 2020
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