UK government considers broadening social impact decision making for retirement plans 

The Department for Work and Pensions has set out its recommendation that the Investment Regulations should be amended to require trustees to state their policies in relation to ESG issues. This is the key recommendation of the Fiduciary Duty in the 21st Century UK roadmap, and is warmly welcomed by the PRI. 

The release of the DWP report is in response to the Law Commission’s publication on Pension funds and social investments, and it also commits to consult on requiring SIPs to state stewardship policies. The government confirmed it is minded to make the proposed changes. 

“This is good news for UK savers. It offers explicit clarification of the need for trustees to consider financially material ESG issues,” said Will Martindale, head of policy at the PRI.  “We find that many UK investors do not systematically integrate ESG factors through their investment processes. Many investors tell us that policy and regulatory effectiveness is hampered by weak implementation and inconsistency. Today’s report will empower trustees and provide clarity on their duty to integrate ESG issues in their investment processes.”  

The DWP’s report follows a similar announcement by the EU in Paris last week. Valdis Dombrovskis, Vice-President for Financial Services, said that the pathway to embed sustainability factors is to “clarify their central role in the way institutional investors and asset managers fulfil their duties to those whose money they manage”. Also last week, the US Department of Labor published its report on ESG investing in retirement savings. The report acknowledges that “ESG investments have increased dramatically in recent years due to investor demand.” 

“The PRI is working with policy makers and investors across all major markets to advance progress towards a regulatory and investment environment consistent with a sustainable financial system,” Martindale noted. 

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