Why you need a sustainability strategy
I believe every pension scheme should have a sustainability strategy – here are three reasons:
Choose your response. There’s a range of responses to sustainability and ESG issues, from ‘do nothing’ to ‘do everything’ – which is best depends on the circumstances of your scheme. Developing a strategy gives you a chance to think about what’s right for your pension scheme and members before committing to any action. For some schemes, simply doing the minimum to obey the law and pension regulations might be the most appropriate response. But it’s important that this is an informed decision rather than an accidental default position.
Have an answer. On a practical level, having a strategy or well-thought-out ESG policy will save you from embarrassment when members (like these ones) or parliamentary select committees (like this one) ask you what you’re doing about ESG or climate risks.
Part of the job. Sustainability and ESG isn’t only about responsible investment, stewardship and making the world a better place. It’s about risk. Risks like climate change could have material implications for your scheme (or your business). Whether you’re a trustee or run a company, it’s your job to think about what will impact your pension scheme or business in the medium- and long-run. And if you advise pension schemes or sponsors, it’s definitely your job to help them think about any material risks. (Some warnings to trustees and actuaries highlighted here and here).
Over the coming weeks and months, I’ll be exploring what a good sustainability strategy might look like and some practical tips on how to reach a consensus view.
(Psst. If you’re interested in learning more about strategy and sustainability and have a few hours to spare, I found this online course by Mike Rosenburg extremely helpful.)