Consultants Back TPR’s ESG Guidance

Twelve major investment advisory firms have signed a joint letter calling for the support of guidance issued by the UK’s The Pension Regulator (TPR) concerning environmental, social, and governance (ESG) factors in investment decisions.

“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,” said the firms in the letter. “We also recognize the significant role that client-facing consultants can play in ensuring that our clients are well-informed on the issues.”

The 12 firms include Allenbridge, Aon Hewitt, Barnett Waddingham, bfinance, Cardano, Hymans Robertson, JLT Employee Benefits, Lane Clark & Peacock LLP, Mercer, Quantum Advisory, Redington, and Willis Towers Watson.

The investment consultants have agreed to ensure clients are made aware of TPR’s guidance that pension plans take into account ESG factors where they are financially material. The initiative was spearheaded by The Association of Member Nominated Trustees (AMNT), and the UK Sustainable Investment and Finance Association (UKSIF).

“The TPR guidance and this initiative reflect growing recognition that ESG factors will affect the

value of pension funds,” said the AMNT and the UKSIF in a statement. “Pension funds typically rely on guidance from investment consultants to make their investments, and this work means these new and emerging risks will be better addressed to the benefit of millions of pension savers.”

According to TPR’s guidance on ESG, because pension funds invest for the long-term, they are exposed to long-term financial risks, including risks relating to factors such as climate change, unsustainable business practices, and unsound corporate governance.

“Despite the long-term nature of investments, these risks could be financially significant, both over the short and longer term,” said TPR in its guidance. “You should therefore decide how relevant these factors are to inform your investment strategy … take environmental, social, and governance factors into account if you believe they’re financially significant.”

The AMNT and the UKSIF acted on behalf of members to convene UK investment consultants to ask how their firms will act on the ESG guidance issued by TPR earlier this year.

“We were really concerned that our members, many of them small pension funds, would not be told of this absolutely vital advice from The Pensions Regulator,” said David Weeks, co-chair of AMNT. “We are delighted that so many consultants—representing such a significant percentage of the market—have agreed to raise the issue with their clients.”