Twelve investment consultants have agreed to ensure clients are made aware of The Pensions Regulator’s guidance that pension schemes take into account environmental, social and governance factors where they are financially material according to the AMNT and UKSIF.

The TPR guidance and this initiative reflect growing recognition that ESG factors will affect the value of pension funds: the Governor of the Bank of England has suggested that climate change may affect the value of a third of shares and bonds; shares in Volkswagen fell sharply as the governance scandal unfolded; and the public seems more likely to boycott firms that fall short in employment standards.

The statement reads as follows: “(Name of company) is happy to join with the Association of Member Nominated Trustees and the UK Sustainable Investment and Finance Association in recognising that the recent investment guidance from The Pensions Regulator marks a major development in TPR’s approach to how trust based DC and DB pension schemes need to address risks around long term sustainability, including environmental, social and governance issues.

“We agree that this change, reflected in the TPR’s statement to trustees that ‘We expect you to assess the financial materiality of these factors and to allow for them accordingly in the development and implementation of your investment strategy’ puts trustees and their advisers under an obligation to react.

“We believe that ESG is a fundamental part of success in long-term investing, therefore we are drawing the guidance to the attention of UK pension fund clients through a variety of routes such as putting consideration of ESG on trustee meeting agendas, issuing briefings and/or holding training sessions. We also recognise the significant role that client-facing consultants can play in ensuring that our clients are well informed on the issues.”

The firms are: Allenbridge, Aon Hewitt, Barnett Waddingham, bfinance, Cardano, Hymans Robertson, JLT Employee Benefits, Lane Clark & Peacock LLP, Mercer, Quantum Advisory, Redington, Willis Towers Watson

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