How should trustees use the DWP’s ESG monitoring requirements to genuinely manage risk?

March 2021

With so much for trustees to grapple with currently, what are the most important questions they should be asking about ESG?

Tegolin Harding took part in Professional Pensions’ recent “Five ESG questions pension trustees should be asking” piece, dealing with the question of how trustees should use the DWP’s ESG monitoring requirements to genuinely manage risk.

From the article:
New reporting requirements requiring schemes to assess and report on the financial risks of climate change within their portfolios will include scenario testing and calculation of carbon footprints.

While these disclosures will only initially be mandatory for the largest schemes, there are no hard and fast rules for how trustees should act on this information, according to Independent Trustee Services (ITS) director Tegs Harding. All trustees should be asking how they go beyond just disclosure into actually managing the risks inherent within those disclosures, says Harding.

“Part of that is about considering how we engage with managers, and how the information we’ve gathered steers investment decisions, as well as how we square this information with the metrics we use to manage risk in the scheme today,” she explains.

“But at the heart of it is thinking what questions do I need to ask to genuinely understand the capital at risk from climate change, and does my adviser have the capability to answer them.”

The full article can be read in this month’s Professional Pensions.