Maggie Williams explores the key findings from our professional trustee survey looking at what trustees really think about sustainable investment in 2018

We spoke to 72 independent trustees to find out what they think are the main challenges and opportunities when it comes to sustainable investment? Here’s what we learnt:

● We asked respondents what ‘sustainable investment’ means to them. The responses were varied, with some trustees interpreting this as the ability to pay pensions over the long-term, and others viewing it as ‘saving the planet’.

Exec summary - sustainable investment

● The variety of definitions suggest that more progress is needed to help trustees understand the concept of sustainable investment and what it means for their schemes.

● Fifty-six per cent of trustees believe that sustainable investment is relevant to their scheme, but only 15% of DB schemes and 12% of DC have moved assets into sustainable investment funds. Forty-eight per cent of independent trustees working with DB scheme and 43% with DC schemes said that they would consider this in the future but have no plans to do so at present.

● Many DB schemes are using strategies such as liability-driven Investment (LDI) where sustainable investment does not currently play a role.

● Members’ views on sustainable investment are rarely taken into account, even in DC schemes. Poor engagement with pensions in general makes it difficult to understand members’ opinions, but there could be an opportunity to use sustainable investment as a tool to improve engagement.

● There is a risk that schemes believe they are addressing sustainable investment by offering a self-select ‘ethical’ fund. Consultant Maria Nazarova-Doyle warns against this approach, and argues that sustainable investment needs to be a core part of the default fund.

● The Department for Work & Pensions published its response to its Pension trustees: clarifying and strengthening investment duties consultation in the summer of 2018. This could require trustees to rewrite their statement of investment principles to show how they take sustainability into account in their investment strategy.

● Some large schemes, such as HSBC and NEST, have already introduced sustainable investment funds into their default strategy. This could encourage other schemes to follow suit.

To download the full Independent Trustee Research Report 2018 click here.

This research was carried out in association with Newton Investment Management.

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