Instead, the new taskforce will concern itself with “developing methodologies and data”.
‘More to do’ on stewardship
In the foreword to the government’s response, Opperman wrote: “The UK is a world-leader in the occupational pension schemes industry.
Our work on environmental, social and governance factors is rightly lauded and we are the first country to introduce landmark regulations on climate change.
"These will require trustees of UK occupational pension schemes in scope of the regulations to consider, assess and report on the financial risks of climate change within their portfolios.
“It is important for schemes to also consider broader sustainability risks and opportunities.
"The “S” of ESG is one area in which the risk management of pension schemes can be strengthened. In my view, trustees who do not factor in financially material social factors are at risk of not fulfilling their fiduciary duty.”
He said he welcomed the evidence of “some strong examples of stewardship on social factors,” but noted that “these came from a minority of respondents and there is clearly more to do”.
“To help drive improvement in this area I would encourage schemes to join the Occupational Pensions Stewardship Council, a forum that can move the dial on stewardship of social factors through collective engagement and the dissemination of best practice.”
Avoid ‘woke capitalism’
He acknowledged that global events “present new ESG risks,” and the response generally admitted that these can in fact redefine what constitutes socially responsible investing, warning against political activism, or what the response refers to as “woke capitalism”.
“This time last year, industries such as defence and nuclear (both civil and defence) were seen as no-go areas for ESG funds but the situation has changed and ESG investing should change with it,” he wrote.
“Recent events have reminded us – if such a reminder were needed – how vital these sectors are to the safety and security of our society. I would urge investors to recognise this – and of course the paramount importance of their fiduciary duty. ESG must look at objective outcomes and not be side-tracked by political activism”.
Opperman cited the war in Ukraine as potentially increasing risks associated with modern slavery, and encouraged investors to “consider the risks of investing in companies or portfolios that do not undertake adequate due diligence”.
'Catching smoke'
The proposed taskforce was welcomed by a number of industry commentators, with LCP’s head of responsible investment, Claire Jones, praising the “helpful analysis and commentary” of the government’s response.
However, she noted that it stopped "short of imposing new requirements” at a time when trustees “already face a significant regulatory burden”.
