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Government’s rejects Law Commission recommendation that pension trustees should take account of ESG issues

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ShareAction and The UK Sustainable Investment and Finance Association (UKSIF) today expressed disappointment at the Government’s rejection of the recommendation from the Law Commission to make clear in regulation that pension trustees’ should take account of environmental, social and governance (ESG) issues where these are financially material (or may become so), and may consider wider ethical factors under certain circumstances.

The government’s consultation sought views on recommendations made in the 2014 Law Commission report ‘Fiduciary duties of investment intermediaries’. The report highlighted that pension scheme trustees should take into account all financially material factors including ESG and may take non-financial factors into account in certain circumstances and examined the positive role of good stewardship. It recommended that the distinction between financial and non-financial factors be clarified in law via the Investment Regulations, something that was accepted by the Coalition Government which issued a consultation in February.

UKSIF’s submission to the consultation, which was based on member feedback, backed the Law Commission report in calling for clarification of fiduciary duty and regulations that encourage high quality stewardship. The Government’s response, published today with a foreword from Pensions Minister Baroness Altmann, is in stark contrast to the Law Commission report and argues the recommended clarification ‘would not necessarily lead to greater clarity for trustees’.

The Government cites a lack of harmony amongst consultation responses as a reason for inaction. This is despite the Government supporting the Law Commission’s conclusions on fiduciary duties, and recognising that many respondents backed change.

ShareAction believes that a lack of consensus amongst respondents as to how the regulations should be amended should be no barrier to clarifying the regulations. The Government’s best practice on consultations, cited in the response, says: “Departments will need to give more thought to how they engage with and use real discussion with affected parties and experts to make well informed decisions”. There has been ample time since the consultation closed six months ago to bring interested parties together to ensure consensus could be reached, but the Government has entirely missed this opportunity, instead relying on the kind of traditional consultation methods that it claims to be leaving behind.

Even more surprisingly, the Government states today that, following the Law Commission’s report, pension scheme trustees now have a ‘good awareness’ of their duty to consider financially material factors- this comes despite confusion last year from trustees of Parliament’s own pension scheme over what constitutes financial and non-financial factors.

This flies in the face of the evidence ShareAction presented to DWP in April, indicating that schemes are still failing to take material issues like climate change into account. The Government’s statement also ignores other evidence in the Pensions and Lifetime Saving Association’s survey of pension funds which paints a very different picture, such as the fact that 36% of respondents said their trustee board was not even aware of the Law Commission’s conclusions.

Simon Howard, Chief Executive of UKSIF, said: “We are extremely disappointed with the Government’s response – this represented a key opportunity to help put UK finance on a more sustainable footing and it has been missed.

“Many trustees are trying to do the right thing despite the inadequate regulatory background, but they deserve explicit regulatory support of the kind that would force laggards to catch up to protect member interests. The Government says guidance from regulators is enough, that is wrong. The world’s governments are gathering in Paris to try to address climate change; if the threat is important enough for that it’s important enough to change some regulations.”

ShareAction’s Chief Executive, Catherine Howarth, said: “Government should have robust reasons for rejecting the Law Commission’s recommendation. Disagreement from respondents on the detail of changes to regulations falls well short of that standard. Why has the Government ignored the chance to bring interested stakeholders together to think this through, and instead taken six months to produce an old-school consultation response rejecting change?

While it is welcome that the Government remains committed to the Law Commission’s view of the law on fiduciary duty, the suggestion that the majority of schemes are dealing adequately with ESG questions risks prejudicing savers’ best interests. Pension trustees need clarity in statute on their fiduciary duties, allowing them to make good decisions on behalf of UK pension savers in a challenging investment context.

“The Government could still take the opportunity to work with stakeholders to find a consensus position that overcomes an antiquated and narrow view of fiduciary duty.”

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Economy

Report: Green, Ethical and Socially Responsible Finance

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“The level of influence that ethical considerations have over consumer selection of financial services products and services is minimal, however, this is beginning to change. Younger consumers are more willing to pay extra for products provided by socially responsible companies.” Jessica Morley, Mintel’s Financial Services Analyst.

Consumer awareness of the impact consumerism has on society and the planet is increasing. In addition, the link between doing good and feeling good has never been clearer. Just 19% of people claim to not participate in any socially responsible activities.

As a result, the level of attention that people pay to the green and ethical claims made by products and providers is also increasing, meaning that such considerations play a greater role in the purchasing decision making process.

However, this is less true in the context of financial services, where people are much more concerned about the performance of a product rather than green and ethical factors. This is not to say, however, that they are not interested in the behaviour of financial service providers or in gaining more information about how firms behave responsibly.

This report focuses on why these consumer attitudes towards financial services providers exist and how they are changing. This includes examination of the wider economy and the current structure of the financial services sector.

Mintel’s exclusive consumer research looks at consumer participation in socially responsible activities, trust in the behaviour of financial services companies and attitudes towards green, ethical and socially responsible financial services products and providers. The report also considers consumer attitudes towards the social responsibilities of financial services firms and the green, ethical and socially responsible nature of new entrants.

There are some elements missing from this report, such as conducting socially responsible finance with OTC trading. We will cover these other topics in more detail in the future. You can research about Ameritrade if you want to know more ..

By this report today: call: 0203 416 4502 | email: iainooson[at]mintel.com

Report contents:

OVERVIEW
What you need to know
Report definition
EXECUTIVE SUMMARY
The market
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
The consumer
For financial products, performance is more important than principle
Competition from technology companies
Financial services firms perceived to be some of the least socially responsible
Repaying the social debt
Consumer trust is built on evidence
What we think
ISSUES AND INSIGHTS
Creating a more inclusive economy
The facts
The implications
Payments innovation helps fundraising go digital
The facts
The implications
The social debt of the financial crisis
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
PUTTING FINANCIAL SERVICES IN AN ETHICAL CONTEXT
An ethical economy
An ethical financial sector
Ethical financial services providers
GREEN, ETHICAL AND SOCIALLY RESPONSIBLE ISSUES IN FINANCIAL SERVICES
The role of investing
Divestment
The change potential of pensions
The role of trust
Greater transparency informs decisions
Learning from past mistakes
The role of innovation
Payments innovation: Improving financial inclusion
Competition from new entrants
The power of new money
The role of the consumer
Consumers empowered to make a change
Aligning products with self
THE CONSUMER – WHAT YOU NEED TO KNOW
For financial products, performance is more important than ethics
Financial services firms perceived to be some of the least socially responsible
Competition from technology companies
Repaying the social debt
Consumer trust is built on evidence
Overall trust levels are high
THE ETHICAL CONSUMER – SOCIALLY RESPONSIBLE ACTIVITIES
Payments innovation can boost charitable donations
Consumer engagement in socially responsible activities is high
Healthier finances make it easier to go green
SOCIALLY RESPONSIBLE COMPANIES
37% unable to identify socially responsible companies
Building societies seen to be more responsible than banks….
….whilst short-term loan companies are at the bottom of the pile
CONSUMER TRUST IN THE BEHAVIOUR OF FINANCIAL SERVICES COMPANIES
Overall trust levels are high
Tax avoidance remains a major concern
The divestment movement
Nationwide significantly more trusted
Trust levels remain high
CONSUMER ATTITUDES TOWARDS GREEN AND ETHICAL FINANCIAL PRODUCTS
For financial products, performance is more important than principle
Socially conscious consumers are more concerned
CONSUMER ATTITUDES TOWARDS TRANSPARENCY
Strategy reports provide little insight for consumers
Lack of clarity regarding corporate culture causes concern
Consumers want more information
THE ROLE OF FINANCIAL SERVICES FIRMS IN SOCIETY
The social debt of the financial crisis
THE SOCIAL RESPONSIBILITIES OF FINANCIAL SERVICES FIRMS
For consumers, financial services firms play larger economic role
Promoting financial responsibility
CHALLENGER COMPANIES AND SOCIAL RESPONSIBILITY
Consumer trust is built on evidence
The alternative opportunity
The target customer

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