In a major and highly anticipated breakthrough, which will be watched around the world, the UK government has today published changes to the regulations that govern how pension trustees consider environmental, social and governance (ESG) factors in their investment decisions. The new regulations also cover how trustees should address pension savers’ ethical concerns and wider interests.

Under the new regulations, the majority of trustees will be required to explain their approach to ESG factors, stewardship of investments, and ethical issues. Many will also be required to report annually to pension scheme members on what they have done to implement their approach to these subjects.

ShareAction has long fought to see the law clearly state that pension schemes are required to address the financial risks posed by a wide range of environmental, social and governance factors, notably climate change.  For the millions of people enrolled into defined contribution pension schemes over the last few years as a result of pensions auto-enrolment, the new regulations bring a much-needed new level of long-term risk protection. They also pave the way for members of UK pension schemes to be heard on ethical investment issues that matter to them.

The DWP opened up its consultation process on these regulations to regular pension savers, receiving a substantial response from over 3400 individuals, the vast majority of whom signalled their strong support for the changes that are now being introduced to the UK’s pension regulations.

Catherine Howarth, Chief Executive at ShareAction, says: “This is a major development, for which we have long fought, and we commend the government on this action to protect UK pension savers. Working people in the UK deserve 21st century risk management of their retirement assets and investment strategies that anticipate the impacts on portfolios of issues like climate change. They also deserve to be heard by the trustees and investment professionals looking after their savings. These regulations are a big step forward in shifting the culture and practice of the UK pensions sector, and we warmly welcome them. It is now over to the FCA to ensure savers in schemes it regulates are given similar information and protection”

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Notes for editors:

  • For more information, please contact Beau O’Sullivan at beau.osullivan@shareaction.org/ 0203 475 7859 or Rachel Haworth, Policy Manager, at rachel.haworth@shareaction.org.
  • The new regulations were laid on 11 September 2018. The majority of the measures will come into force on 1 October 2019, with other measures coming into force on 1 October 2020.
  • ShareAction has been pushing for a review of these regulations since undertaking research in 2012 on the fiduciary duties of pension schemes with a grant from the Nuffield Foundation
  • ShareAction’s vision is a world where ordinary savers and institutional investors work together to ensure our communities and environment are safe and sustainable for all. Our mission is to unleash the positive potential of the mainstream investment system. To do this: We’re building a movement for change in our investment system by working with people inside and outside the industry to challenge the status quo; We’re unlocking the positive potential of the investment system by working with large and small investors to change unsustainable corporate practices; We’re reforming the investment system by advocating for change in the policies, governance, and incentives that drive behaviours in the investment industry.