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ESG — Or Else, Consultants Warn Pension Clients

Aon Hewitt, Mercer, Redington, Willis Towers Watson, and other firms said they’ll press U.K. pensions to fufill their regulatory obligations.

  • Joe McGrath

Some of the U.K.’s largest pensions consultants have agreed to pressure asset owners to consider environmental, social, and governance factors in their investment decisions.

In total, 12 major U.K. consultants signed on to remind schemes of the Pensions Regulator’s ESG guidance, where such factors are financially material. The U.K. investment consultant market is hugely influential, with the 12 largest firms advising around £1.6 trillion ($2.2 trillion) in assets, according to the Financial Conduct Authority.

The firms on board with the initiative are Allenbridge, Aon Hewitt, Barnett Waddingham, bfinance, Cardano, Hymans Robertson, JLT Employee Benefits, Lane Clark & Peacock LLP, Mercer, Quantum Advisory, Redington, and Willis Towers Watson.

In a joint media statement, they said the recent investment guidance from the Pensions Regulator represented a major development in how the regulator wants defined contribution and defined benefit schemes to address the risks around ESG issues. “We believe that ESG is a fundamental part of success in long-term investing, therefore we are drawing the guidance to the attention of UK pension fund clients through a variety of routes such as putting consideration of ESG on trustee meeting agendas, issuing briefings, and/or holding training sessions.”

[II Deep Dive: Investors to Press Managers on ESG Claims]

The announcement coincided with the first day of the UN Principles for Responsible Investment conference in Berlin, Germany. Investors from many of the world’s largest retirement funds are there meeting with asset managers and policymakers about effective sustainable investing to shape major companies’ behavior.

The consultants’ public commitment represents a major step in ensuring trustees get guidance on ESG issues, according to Brunel Pension Partnership CEO Dawn Turner — especially trustees of small and resource-constrained funds.

In a statement, Turner said she hoped the move would be “a catalyst to ensure ESG issues are at the heart of the client offering” of the investment consultant industry.

The U.K.’s Association of Member Nominated Trustees (AMNT) — which represents about 700 trustees and directors at U.K. retirement schemes with assets of more than £650 billion — welcomed the consultants’ pledge. The group had harbored concerns that some of its members may have overlooked the recent guidance from the Pensions Regulator, AMNT co-chairperson David Weeks said.

The public commitment represented “a significant step forward for the investment consultant industry,” according to Leanne Clements, an AMNT campaign manager. “Only with their support at grass roots level can we create the kind of shift in thinking on these issues that the regulator and we are looking for from trustees.”