The Pensions and Lifetime Savings Association (PLSA) has published a new guide to help UK pension funds comply with environmental, social and governance (ESG) requirements coming into force later this year.
The guide is designed to support trustees of around 30,000 pension schemes managing nearly £2trn in assets, offering step-by-step instructions that can be applied to schemes' individual perspectives and situations.
Developed by a cross-industry taskforce, it uses myth-busters, case studies and questions that the PLSA say trustees should be asking of themselves, asset managers and advisors.
Schemes that disregard risks or opportunities from ESG factors will have to justify why this does not harm their investments from 1 October under new rules from the Department of Work and Pensions.
"This guide is particularly helpful in setting out how trustees can explore, articulate and reach a consensus on the extent to which ESG factors are priced into the market," said Guy Opperman, minister for pensions and financial inclusion.
"It not only sets an expectation that all schemes have a responsibility here, it also highlights actions that all schemes, whatever their resources or capacity, can do."
The guide is structured to reflect the typical journey that trustees take to ensure ESG factors are properly understood, formalised in a relevant policy and, where appropriate, reflected in broader decision making.
It comes after a recent study found that the majority of private investors are now interested in ESG factors, and that many think these are more important than returns.
Personal values, a desire to avoid harmful companies, wanting to have a positive impact and recent developments around climate change were cited as the main reason for ESG interest by the investors studied.
The new PLSA guide coincides with pension schemes' summer trustee meetings and complements further guidance to be published by The Pension Regulator.
"For many pension schemes, ESG factors are already central to risk management and investment decisions," PLSA policy board member, Brian Henderson, said. "However, not all schemes are moving at the same pace.
"The ESG guidance should have something for all trustees, ranging from those schemes that are early in their journey looking for guidance, to those already implementing their agreed policies and beliefs."