On 13 November, Burges Salmon hosted a packed-out seminar on the subject of "Pensions, ESG and Stewardship: How prepared are you?". Our expert panel was Paul Owens, Deputy Superintendent of Pensions with the Government of Alberta , Andrew Ninian, director of stewardship and governance at the Investment Association, Brendan Walshe from the Pensions Regulator, and Burges Salmon partner Susannah Young, with fellow partner Clive Pugh opening proceedings.
As an environment and climate change lawyer who is closely following the ESG agenda and the role it plays in 'greening finance', it was great to hear the degree of engagement within the financial sector on ESG issues generally, and environment and climate change in particular. Climate change, and the shift to a net zero economy, is clearly an important factor for pension trustees and asset managers, and it was recognised that these are financial risks impacting the long term performance of the investment, rather than simply being moral preferences under SRI. Paul's advice to "think of ESG as a positive risk mitigator and not as a detractor of return" chimes with the recent evidence on the strong performance of funds that consider ESG factors in investment decisions. I was also pleased to hear Paul highlight water scarcity as a major risk for the future that should be considered (in appropriate cases) within the basket of ESG risks.
Andrew echoed these comments, and highlighted inadequate climate risk disclosures as a barrier to an effective market for stewardship. It was agreed that more work was needed to ensure a common understanding of the terminology so that the whole sector, and not just ESG specialists, can be clear on what needs to be considered.
All participants stressed the importance of good governance if the financial sector is to rise to the challenge of being part of the solution to climate change and the transition to a net zero economy. It was accepted that the rapid pace of change, and the potential subjectivity of judgement calls on ESG factors, is challenging for pension trustees, but there was a lot of optimism in the room about rising to that challenge. As Paul concluded in his presentation "if pension plans don’t address these issues, can we trust society to do so?".