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.
Our ESG report – the ESG journey in four steps
1. BeliefsIndividual 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. PolicySchemes 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. ProcessITE 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. PortfolioPortfolio 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.
Before you access this page, please read and accept the terms and legal notices below. You’re about to enter a page intended for sophisticated, institutional investors only.
This content is provided for informational purposes only. The information provided does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation or solicitation of any specific products or the investment management services of Mercer, or an offer or invitation to enter into any portfolio management mandate with Mercer.
Past performance is not an indication of future performance. If you are not able to accept these terms and conditions, please decline and do not proceed further. We reserve the right to suspend or withdraw access to any page(s) included on this website without notice at any time and Mercer accepts no liability if, for any reason, these pages are unavailable at any time or for any period.