ESG and stewardship issues in pensions


Produced in partnership with Catherine Salafia , Mark Latimour and Michael Jones of Eversheds Sutherland .
Practice notes

ESG and stewardship issues in pensions


Produced in partnership with Catherine Salafia , Mark Latimour and Michael Jones of Eversheds Sutherland .

Practice notes
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Meaning of ‘ESG’ and ‘stewardship’

ESG

The term ‘ESG’, which stands for ‘environmental, social and governance’, is not clearly defined in law.

ESG is frequently used as a catch-all term to encompass concepts like ‘sustainable investment’ and ‘socially responsible investment’. ESG investment analyses ESG opportunities and risks to understand their effect on risk-adjusted-returns. ESG factors generally include climate change.

With policy-makers focusing on the sustainability of investments, pension funds (which represent some of the biggest institutional investors) have been put under increasing pressure to consider the ESG impact of their investments. In particular, the government believes that ‘pension investments, with their long time-horizons and wide take-up across the working age population, are ideally placed to win widespread support for investment in action which mitigates and adapts to climate change’.

For examples of ESG factors and their potential financial impact, see: Recognition of ESG factors as financial factors, below.

Stewardship

The Pensions Regulator (TPR) defines ‘stewardship’ as ‘the responsible allocation and management of capital across the institutional investment community, to create sustainable

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United Kingdom
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Key definition:
Investments definition
What does Investments mean?

A product specified in the FSA Regulated Activities Order.

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