Following the Government’s decision last week to reject the Law Commission’s recommendation that pension trustees should take account ESG issues, we spoke to Fergus Moffatt, Programme Director and Head of Public Policy of UKSIF (UK Sustainable Investment and Finance Association) about that decision, the reasons behind it and its implications.
The Law Commission Report’s conclusion was that: “[pension] trustees should take into account factors which are financially material to the performance of an investment. Where trustees think ethical or environmental, social or governance (ESG) issues are financially material they should take them into account.”
What do you think drove the decision of the government to reject the Law Commission’s recommendations?
The drivers for the Government’s rejection of the LC’s recommendations are unclear. DWP’s response says “many” responses called for regulatory change, but then cite a lack of consensus on how to amend the regulations and responses achieving slightly different outcomes as reasons to make no changes.
It is also unclear, if the desired outcome was consensus, what steps the Government took to try and achieve it in the six months since the consultation ended.
Was there anything unreasonable within the recommendations?
We don’t think so. In terms of stewardship, since the Kay Review, the concept has gained momentum as a way to encourage long-term value creation. The Law Commission was right to recommend a review on whether trustees should be required to state their policy on stewardship.
We felt the consultation question on this – which proposed requiring trustees to sign the Stewardship Code or explain why they had not- slightly missed the point. Many pension funds have stewardship activities carried out on their behalf by managers and so it seemed to us that having the trustees state their approach to stewardship in the SIP would be a far more effective way of achieving the same goal.
In terms of the financially material language we think the consultation reflected the direction of the LC findings and was reasonable.
Had the Government accepted the recommendations, what changes would we have seen in the pensions market?
A change to the investment regulations as recommended by the Law Commission would have meant a clear distinction in law over what constitutes financially-material factors – which trustees would have been required to consider – and non-financial factors.
The former would have sent a very clear signal to trustees, their advisors and consultants both that the idea of solely maximising returns at the expense of all other considerations is simply a misconception and that they needed to be aware of a wide range of evolving and emerging issues which might be “financially material”.
What is the immediate impact of the government’s refusal to accept the recommendations?
One immediate effect is that a key driver to better trusteeship won’t crystallise. Many trustees are making progress in ESG but this would have been a really useful accelerator. Instead, the Government has stated that, rather than amend the investment regulations, they will work with The Pensions Regulator to create guidance on trustees’ responsibilities.
This process has already begun: for the past few months TPR has been working on a revised DC code which will be issued alongside guidance that incorporate the findings of the Law Commission and the Trustee Toolkit has already been updated to reflect this. Included in its response the Government announced a new consultation to examine how pension schemes make information on investments and stewardship available to beneficiaries so we hope to see progress here.
And in the long-term?
We think the sector is moving in the right direction but a chance of faster progress has been missed. The Law Commission report provided clarity over the role and responsibilities of trustees with regard to their fiduciary duty. The report represented a view of the current legal environment in which trustees operate- welcome news for engaged pension schemes.
But even since the publication of the report we have seen trustees and schemes refer to their ‘duty to maximise returns’ and it is clear the reach of the report has been limited. Our view is that by including the Law Commission’s recommendations in the investment regulations the Government had the chance to ensure laggards in the sector were brought up to the same level as other, more responsible investors. There is no doubt we are moving in the right direction, but with this approach it will take longer.
Does the discussion go on or is the issue closed for now?
We will ask our members what they think in order to decide what to do, but in parallel with that we will continue to work closely with DWP and The Pensions Regulator to ensure guidance that makes clear that financially-material factors including ESG should be taken into account by trustees and that non-financial factors may be taken into account.
Green Weddings Trend: Why 70% of Newlyweds Are Going Green
A couple of months ago, my best friend got married to her new husband. They are both very eco-conscious people, so they decided to have a unique twist on their wedding. They asked for the following:
- They arranged a carpool with their friends.
- They didn’t have any balloons. Instead they used umbrellas.
- They used plant materials instead of plastic confetti.
- My friend insisted her husband not purchase a diamond. In addition to being ecologically conscious, she didn’t like the idea of having a stone that was used in conflict zones.
My friends aren’t the only ones making these changes. In fact, nearly a quarter of all newlyweds are organizing green weddings.
Green Weddings Are Becoming the Norm
People are more concerned about green living than ever before. They are trying to incorporate environmental protectionist ideas into every facet of their lives, even the most intimate, such as marriage. A growing number of people are trying to have green weddings, which can make a big difference in reducing their carbon footprint.
How much of a difference can this make? Here are some statistics to bear in mind:
- The Center for Disease Control reports that about two million marriages are formed every year.
- Approximately 70% of all marriages have green elements today.
- This means that 1.4 million marriages are green.
There are a number ofreasons that green weddings are becoming more important. Here are a few.
People Are More Worried About Environmental Preservation than Ever Before
Green living in general is becoming a greater concern for most people. Even younger conservatives are breaking from their older counterparts by insisting on fighting climate change. According to a poll from Pew Research earlier this year, 75% of Americans say that they are very concerned about protecting the environment. Having green weddings is a good way to act on this concern.
One of the biggest changes people are making is using recycled products for their green weddings. This is explained by the research from Pew:
“Overall, 32% of U.S. adults say they are bothered a lot by people throwing away things that could be recycled. Roughly six-in-ten Americans (61%) who say they always try to live in ways that protect the environment say it bothers them “a lot” when others throw away things that could be recycled. Among those who are less focused on environmental protection, only a quarter say it bothers them a lot when others don’t recycle. People who are environmentally conscious are also twice as likely as others to say that seeing someone incorrectly putting trash in recycling bins bothers them a lot (42% vs. 21%).”
Indifferent Politicians Are Driving them to Take More Initiative
Many politicians in power have been very hesitant to take action on climate change. Many of them have openly stated that it is a hoax. These politicians are forcing people to do what they can in their own lives to make a difference. Making small changes, such as hosting green weddings, is a great way to improve the environment without waiting for political momentum.
Cost and Simplicity
A couple of the biggest reasons that people want to host green weddings have nothing to do with their concern for the environment. Running green weddings is simply cheaper and simpler than having a massive, traditional one. One of the biggest changes is that they are buying green engagement rings from the best brands.
Green Weddings Are the Future
Green weddings have become very popular over the past few years. They will probably account for close to 90% of all marriages by 2025. People that are planning to get married should look into the benefits and plan accordingly.
Green Tech Start-Ups: Are they the Future?
Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.
Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.
Fulfilling a Genuine Need
Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.
Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.
After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.
Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.
Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.
Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.
A Fundamental Foresight
Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.
However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.
They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.
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