UKSIF calls for more clarification on fiduciary duty for Pension Scheme Trustees

UKSIF calls for more clarification on fiduciary duty for Pension Scheme Trustees

 

UKSIF and a number of leading UK asset owners are calling on see the Government and other policymakers to consider greater clarification of fiduciary duties for UK pension schemes. Currently, there is a level of inconsistency in the interpretation and depth of understanding across schemes regarding the extent to which Environmental, Social and Governance (ESG) factors and particularly impacts should be addressed and interpreted within pension scheme trustees’ fiduciary duties.

The updated Green Finance Strategy in March, Mobilising Green Investment, announced that the Government will engage stakeholders on clarifying fiduciary duty, following engagement with stakeholders and members of the House of Lords during the Financial Services and Markets Bill.

Through guidance for the market and ongoing additional support, including industry-wide training, UKSIF believes the government could help provide schemes with a much clearer expectation of the extent they can and should take account of sustainability impacts, social and other sustainability considerations. This could help reduce the present confusion and inconsistency in the area.

UKSIF recommends that relevant government departments, including the Department of Work and Pensions, as well as regulators such as the Financial Conduct Authority and the Pensions Regulator issue guidance for UK occupational pension schemes on a statutory or non-statutory basis.

UKSIF believes that factoring in financially material ESG issues and actively managing associated risks and impacts is consistent with fiduciary duties and this clarification would make this clear across the market.

Full details can be found in our briefing on fiduciary duty, which has the support of a number of our asset owner members, including Scottish Widows, Phoenix Group, Brunel Pension Partnership and Nest available here.

James Alexander, UKSIF Chief Executive, said: “We continue to see some hesitancy in parts of the UK’s pension sector and the wider industry over what sustainability factors and particularly impacts can or should be taken into account on behalf of beneficiaries. We have seen this particularly with the inclusion of social factors which we believe are crucial to consider in the long-term performance of companies, portfolios and economies. This is why we believe that it is vital the Government puts out industry guidance on fiduciary duties, providing schemes with the support and guidance needed on the ESG risks and impacts they should already be considering when making investment decisions.”

Heidi Douglas-Osborn, UKSIF Government Affairs and Policy Manager, said: “We believe that guidance would be a great support to the industry and are excited to have the endorsement of leading asset owners. This guidance would not only provide a clearer direction for pension scheme trustees but help the UK move toward its net zero goals and support a long-term sustainable finance system. While we do not think that substantive changes are necessarily needed to the law, the core issue we identify is around interpretation of fiduciary duty and we would like to better support trustees and others to help fulfil these duties.”

ENDS

Notes to Editors:

DISCLAIMER: This briefing was developed in collaboration with a number of UKSIF members but does not necessarily represent the views of the entire membership, either individually or collectively.

 

About UKSIF:

UKSIF is the membership organisation for those in financial services committed to the growth of sustainable and responsible finance in the UK. We look to promote a more sustainable and inclusive financial system that works for the benefit of society, the environment, and us all.

We represent a diverse range of financial services firms committed to these aims, and our 300+ members include investment managers, pension funds, banks, financial advisers, research providers, NGOs, among others, representing over £19trn in global assets under management (AUM). For more information visit www.uksif.org.