If you are a trustee aiming at improving your ESG governance have you agreed a set of investment beliefs for your scheme? This can help inform your Statement of Investment Principles and assist with ensuring a joined up approach with other advisers. The investment beliefs should focus on ESG issues that are the most important drivers of the scheme’s investment decisions. The beliefs will act as a useful tool when it comes to decision making, as they provide a framework to be considered when making investment choices.

How to prepare an ESG Investment Beliefs policy

In looking to agree these beliefs, the first practical step might be conducting a survey of the trustee board to get a feel for general views on ESG and its impact on investment strategy. The survey should make it clear that purpose is not to seek the personal beliefs of individual trustees, but beliefs in relation to how the scheme should be investing. Whilst it is unlikely the board will agree on every issue, the survey results should provide a basis from which a set of investment beliefs can be formed.

The key point to ensure is that the agreed investment beliefs are capable of being linked to actions that evidence implementation. For example, if you agree on a belief that as trustees you should “seek sustainable returns from well governed and sustainable assets”, are you able to evidence that steps have been or are being taken to ensure that the scheme assets are well governed and sustainable?

Do we need to consider members’ views?

Whilst it is not necessary to consider members’ views on non-financial matters that impact your investment decisions, you should consider if the cohort of members will agree with the investment beliefs you decide on. It will be difficult logistically to ascertain and meaningfully incorporate member views where the scheme has a large number of members, so getting direct input from members is normally unfeasible. However, you should still carefully consider the demographic of your scheme and the nature of potential ESG issues that may affect member returns when deciding on your investment beliefs.

 You may want to consider how practicable the application of your beliefs are as well. For example in setting implementation dates, are you are able to put into practice net zero emission targets by a realistic date? With the single code due to be implemented later on this year, now may be a good time to reflect and consider what your beliefs are. This could help with requirements under the code for aligning your investment decision making requirements alongside your risk framework. If we can help you to do this please contact Kate Granville Smith (Kate.GranvilleSmith@burges-salmon.com).