UK DWP publishes management guidelines for pension fund trustees

The UK Department for Work and Pensions finalized guidance on Friday on how pension trustees report on their stewardship activities. He understands how trustees should oversee asset managers when it comes to voting and engaging on climate and other ESG issues.

The DWP’s guidance measures are “intended to help pension schemes play their part in addressing climate change and protect their members’ savings against ESG risks”, said Therese Coffey, Secretary of State at work and pensions, and Guy Opperman, pensions and financial inclusion. Minister, in a joint statement.

The guidelines increase climate reporting requirements using the Task Force Climate-Related Financial Disclosure guidelines that already apply to pension funds with at least £5bn ($6.2bn) and will apply to those with at least £1bn in October.

The new guidelines explain the DWP’s expectations for two reporting requirements: the Implementation Statement and the Investment Managers Statement. It also requires administrators to establish stewardship priorities.

Simon Daniel, vice-chairman of the Society of Pensions Professionals’ investment committee, noted that the guidelines encourage pension funds to produce more user-friendly summaries of management activities. It should also help administrators clarify their stewardship priorities and identify the most important engagement activity, he said.

When it comes to trustees responsible for the stewardship actions of their external investment managers, “the regulatory mood music remains loud and clear, this delegation is not absolution,” Mr. Daniel said in an e-mail. mail.

James Moore, a partner at consultancy Lane Clark & ​​Peacock, believes the boards encourage trustees “to move from relatively passive spectators in how their investment managers monitor their assets to much more active participants in the workings of the process. of stewardship and where it is focused, particularly around voting and engagement,” he said in an emailed statement. While this may represent another burden for fiduciaries, “we believe it is a burden that, when properly addressed, can be a very powerful tool in generating positive investment change,” Mr. Moore.

The Department for Work and Pensions has said it will review how the guidelines are followed in the second half of 2023.