Getting to grips with ESG reporting

There’s no doubt the UK government is cranking up the pressure on pension schemes to help it meet its net-zero carbon emission target. Pension schemes hold trillions in investments and have the power to force businesses to move faster on reducing their carbon footprint.

The government has recently consulted on plans which will require schemes with more than £5 billion in assets to publish disclosures on climate-related risks from October this year. These requirements are expected to filter down to smaller schemes with over £1 billion in assets from next year.

This comes on top of existing requirements for trustees to report on their Environmental, Social and Governance (ESG) investments.

Since October 2020 all trust-based pension schemes with more than 100 members have been required to publish an annual implementation statement which sets out how they acted on the principles set out in their Statement of Investment Principles (SIP). This must include schemes’ policies in relation to ESG considerations, such as climate change.

While reporting on ESG investments is in principle relatively straightforward for trustees, the devil is in the detail. Schemes have multiple fund managers – all of which will have different approaches to ESG investing, so trustees will need to collate several layers of information from multiple sources.

This includes, for example, whether their managers have ESG or climate change policies and if so, how these policies are integrated into their investment process. Do they engage with the senior management of companies whose shares they hold to influence their behaviour? Do they use their vote to influence how companies act? These and numerous other ESG-related questions need to be answered and reported on if trustees are to meet their implementation statement responsibilities.

This is coupled with the reality that whilst the asset management community states it is committed to the principles of ESG investing, it is still coming to terms with meeting the detailed information required for implementation statements.

That’s why Mobius Life has recently launched an ESG reporting service for our pension scheme clients. As all our clients’ assets are held in one place on our platform, we are perfectly positioned to gather this information from managers. The resulting report collates asset managers’ ESG themes - set out in a way which helps trustees complete their implementation statements.

The Mobius service is designed to help trustees contextualise the approaches of asset managers and to help them understand how the scheme assets are being invested. This would otherwise be a time-consuming and onerous task for them to complete.

It’s just one more example of the benefits to schemes of holding their assets on the Mobius Life platform.