WITHOUT BETTER DATA PENSION FUNDS CANNOT POSSIBLY FULFIL THEIR ESG MANDATES (18th May 2021)
A FUTURE OF FINANCE WEBINAR WITH ASSET MANAGERS, PENSIONS, REGULATORS AND TECHNOLOGY COMPANIES
Tuesday May 18 2021, 14.00 – 15.00 UK time
Pension fund trustees in the United Kingdom are now under a fiduciary obligation to manage environmental, social and governance (ESG) risks on behalf of the members of the fund. This is not an easy duty to fulfil.
That is partly because pension fund trustees cannot simply choose what they believe to be right in terms of ESG. They must ensure the fund has sufficient assets to pay the promised pensions (in defined benefit, or DB, schemes) or maximise the value of the pension portfolio of the members (in defined contribution, or DC, schemes).
Trustees have somehow to demonstrate that they take ESG fully into account, without causing financial detriment to the fund. Needless to say, there is no shortage of investment consultants and asset managers willing to declare that this is a bogus dilemma, because ESG-driven funds will outperform in future years.
The “wall of money” ESG strategies are attracting may prove them right, even after taking into account the massive transactions costs of transitioning to an ESG-driven strategy.
But proving ESG credentials will take more than ditching managers that buy oil, mining, tobacco and firearms stocks and appointing managers that invest in renewable energy, or adding an ESG fund to the defined contribution pension plan roster, or signing up to the United Nations-backed Principles of Responsible Investment (PRI).
It will take data, not just to choose investments but to convince members and regulators that the fund is fulfilling its duty to take ESG seriously.
The Pensions Regulator (TPR) has told trustees that they ought to sign up to the Stewardship Code published by the Financial Reporting Council (FRC). Its purpose is to encourage the “responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.”
Trustees have since October 2019 had to include in their Statements of Investment Principles verbiage on how they vote at AGMs and how they engage with the companies they invest in – even though the switch to passive investing makes it virtually impossible for some funds to do this.
In addition, trustees must (since October 2020 for DC schemes from 1 October 2021 for DB schemes) report how they fulfilled their ESG responsibilities in the previous year, in online, publicly available statements.
Although there is no shortage of consulting services and ratings from the major investment consultants, and a wide variety of other products from data vendors, rating agencies, technology vendors and global custodian banks – many of which want asset managers as clients, not asset owners – the extent and quality of the data about ESG factors falls far short of what is required to make informed and convincing public statements.
This Future of Finance webinar will explore what ESG data is available, where the most serious shortcomings lie, and what is needed to fix them. Among the topics which will be discussed are:
1. How different are the ESG data needs of asset managers and asset owners?
2. Are ESG ratings distorted by conflicts of interest is the same way as credit ratings?
3. How helpful are ESG disclosure requirements in terms of producing useable data?
4. Is there a multiplication of ESG questionnaires?
5. Is there a need for ESG standards for (a) data collection and (b) reporting?
6. How does data quality vary between the “E,” the “S” and the “G” of ESG?
7. How easy or difficult is it to assess the ESG credentials of asset managers?
8. How are funds assessing the environmental impact of the (a) equity and (b) fixed income investments they hold?
9. How valuable is signing up to the Principles of Responsible Investment (PRI)?
10. How are funds measuring their shareholder engagement?
11. How heavy is the cost burden which ESG places on pension funds (e. g. in transition, monitoring and reporting costs)?
12. How do you measure the ESG characteristics of a derivative?
13. How do you measure the ESG characteristics of real estate?
14. Does the current state of ESG data permit funds to deliver anything to members and regulators but “greenwashing”?
15. Where are the principal ESG data shortcomings – and how can they be fixed?
16. Is the demand for ESG information leading to increased supply?
Chris Sier, Executive Chairman at ClearGlass https://www.linkedin.com/in/christopher-sier-3108a…
Chris Johnson, Senior Product Manager, Market Data, Securities Services and Markets at HSBC https://www.linkedin.com/in/chris-johnson-2b6764/
Natalie Winterfrost, Director at the Law Debenture Pension Trust Corporation https://www.linkedin.com/in/natalie-winterfrost-04…
Alex Struc, Portfolio Manager Credit at Goalsfirst https://www.linkedin.com/in/alex-struc-4968a6109/
Svante Horn, Senior Advisor at Anthropocene FI Institute https://www.linkedin.com/in/svante-horn-999b5b/
Arthur Carabia, Director – Market Practice and Regulatory Policy at International Capital Market Association (ICMA) https://www.linkedin.com/in/arthurcarabia/
Moderated by Dominic Hobson Co-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222…
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If you would like to participate in the audience please let us know below or contact Wendy Gallagher on the email above
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