ESG should not be an add-on feature of investment advice
Pension funds in the UK are under more regulatory pressure to act on ESG issues and particularly over climate change. Some people, the Lens among them, would argue that the powerful advisers of pension schemes have a huge leadership role to play here.
The pensions and investment consulting industry in the UK is beginning to be coaxed into this. Two organisations have called for consultants to offer a minimum level of ESG services to pension schemes. The Association of Member Nominated Trustees and the UK Sustainable Investment and Finance Association are behind the call for the UK’s roughly 16 main investment advice firms to offer a set of minimum ESG services as part of their standard package.
At a minimum, consultants should train all their client-facing staff in ESG risks, not just those who are in dedicated responsible investment groups. Firms should even have ESG targets for staff, including at the most senior levels.
The key for pension schemes is to see that basic ESG services – such as fund manager ratings that include an ESG score – form part of their advisers’ basic package of services and are not billed for separately.
More advanced ESG consulting such as climate change modelling or stress testing of portfolios is something for the future, although the AMNT and UKSIF hope to see those tools beginning to be built now.
We’ve talked quite a lot here at the Lens about the mainstreaming of ESG. Consultants are crucial to this.