UK pension schemes’ ESG report 

UK pension schemes will play an important role in the UK’s drive for net zero and other ESG goals.

Our Time for Action: UK Pension Scheme’s Journey to ESG report draws on data gathered from Mercer’s Responsible Investment Total Evaluation (RITE) analysis of more than 650 UK occupational pension schemes.

It shows ESG and responsible investment is being taken seriously, with 98% of trustees believing ESG performance can improve financial returns.

But, like the rest of the financial industry, pension schemes are playing catch-up in a complex environment where documentation as well as intent is everything, including a need for sustainability reports and ESG statements.

Key findings from our ESG report
believe ESG issues create risks and opportunities
seek to align with or beyond sponsor’s ESG policies
have proficient understanding of ESG
have processes to integrate ESG into decision-making
independently conduct stewardship activities
are seeking to introduce an ESG fund

Our ESG report – the ESG journey in four steps

This ESG report breaks the ESG journey down into four steps based on Mercer’s Sustainable Investment Pathway.
  • 1. Beliefs
    Individual trustees may have diverse and strongly held beliefs – but RITE found that fewer than half of trustees had carried out an ESG beliefs survey or workshop in the past three years to help them come to a common view. RITE also showed that resources do not always dictate actions, with some smaller and mid-size schemes having made more progress in their ESG reporting journey than larger ones.
  • 2. Policy
    Schemes have been required to include ESG and stewardship policies in their Statement of Investment Principles since 2019 but RITE found that few had moved beyond this first step. For example, just 10% of schemes have developed a standalone policy related to responsible investment, ESG or sustainability. Meanwhile, company boards are examining their pension schemes as they adopt ESG practices but fewer than one in four schemes has sought to align with the principles of their sponsor company.
  • 3. Process
    ITE found almost two-thirds of schemes had adopted some measures for integrating ESG into their processes but others have work to do to ensure their assets are invested in line with their beliefs. Most schemes do not carry out regular ESG statements of asset managers’ stewardship records. Few schemes have conducted analysis of carbon intensity and climate change scenarios via sustainability reports but this will become a more pressing matter.
  • 4. Portfolio
    Portfolio is where intention turns into action – but RITE’s analysis shows fewer than 40% of DC schemes include an ESG fund in their default strategy and around half of schemes make these funds available to members who self-select. This leaves tens of billions of pounds in pension savings without explicit exposure to ESG funds. For DB schemes, fewer ESG options mean less participation in ESG performance but there is a growing focus on developing sustainable fixed-income products.


Integrating ESG is a monumental challenge for UK pension schemes that they cannot undertake alone. Our ESG report concludes with a series of recommendations for stakeholders, including the government, regulators, asset managers and advisers, to help them fulfil this goal.
Related solutions
Related insights
Related case studies