ESG
factor identification, implementation and monitoring is now a fundamental part
of setting pension scheme investment beliefs, according to investment
consultants Redington.

At Minerva’s ESG Educational Event held recently in London, Honor Fell, Head of Responsible Investment at Redington, spoke about how investment consultants can best help pension funds with their new ESG-related responsibilities.

There have been a number of developments in the last year aimed at making asset stewards take more notice of Environmental, Social and Governance factors when making investment decisions. These developments include:

• For asset managers: a revised Shareholders Rights Directive (SRDII)  from the FCA;
• For private-sector pension schemes: new Occupational Pension Scheme Investment Regulations from DWP and tPR;
• For public sector funds: increased attention from the LGPS Scheme Advisory linked to Government policy on climate change and wider responsible investment considerations; and
• For all three: a completely overhauled Stewardship Code from the FRC.

Honor’s view was that pension funds should expect their
investment consultants to help them with their ESG journey by focussing on
three simple steps: 

1. Using consistent and
   clear definitions;
2. Sharing the ‘art of the
   possible’ by delving into the consultant’s investment toolbox; and
3. Providing a
   decision-making framework to guide clear actions & objectives.

By formally creating/reviewing ESG investment beliefs, Honor
pointed out that going through the process highlights knowledge gaps, areas of alignment,
and points of disagreement for Trustee boards. In clearly setting out ESG
beliefs, asset stewards can simplify the terminology used, agree a common
language to express their beliefs, and focus on what matters most to them and
their scheme members.

However, Honor cautioned that investment beliefs are only
truly valuable if they are ‘of good quality’, being clear, justifiable / evidence-based,
and revisable; if they fit your needs; and if they are used, and are not a tick
box ‘set and forget’ exercise.

For more information on how asset stewards can get to grips with their new ESG factor responsibilities, or to find out more about us, say hello@minerva.info