by Simon Howard | June 23rd, 2017
The Law Commission has today (June 23) published an important report, Pension Funds and Social Investment. The title is a bit misleading; in making it clear that social investment is legally permitted, the Law Commission redoubles its efforts to clarify the status of more conventional ESG investing. Some barriers to social investing are addressed but the big change in this report is a full frontal attempt to make contract-based DC schemes conform to the Law Commission’s generally excellent work on fiduciary duty, stewardship and ESG.
The report makes five recommendations. These are aimed at making it clear that “social investment” is permitted by pension funds of all types in the context of the Law Commission’s thinking on fiduciary duty in its 2014 report.
Recommendation one is for the pension regulations to be changed such that trustees have to state their policies in respect of evaluating ESG risks and considering members’ ethical concerns.
Recommendation two is for the regulations to be changed so that trustees of both DB and DC schemes have to state their position on stewardship. Both repeat calls from 2014.