The PLSA has set up an industry group to help produce guidance which will support schemes in getting to grips with their new 2020 Environment, Social and Governance (ESG) and stewardship reporting deadlines and duties.

In 2018 and 2019, the Department for Work and Pensions (DWP) made changes to the Occupational Pension Schemes (Investment) Regulations 2005 which require trustees to disclose how they have considered ESG, stewardship and engagement in their investment approaches.

October 2019 saw the first set of deadlines for trustees to initially document their approaches in their Statement of Investment Principles (SIP), with DC schemes required to publish their SIP online. October 2020 will see trustees of DC schemes required to publish ‘implementation statements’ explaining how they have implemented their SIP policies, including on ESG and stewardship, as well as provide further information in their SIPs on their asset manager arrangements including investor engagement.

The 2019 changes to the Investment Regulations also place new requirements on DB schemes to publish their SIPs online by 1 October 2020 and report annually on the implementation of their policies around voting and stewardship behaviour from 1 October 2021.

The PLSA initiative will help schemes get both clear and consistent information from asset managers on their voting behaviour, as well as provide guidance on communicating how they have implemented their responsible investment and stewardship approaches. To do so, the PLSA has pulled together a cross-industry group of expert participants including scheme investors, professional trustees, investment consultants, asset managers and legal advisers.

A stakeholder group made up of key industry organisations, government departments and regulators will also be supporting the work.

The group will be chaired by PLSA Policy Board member Laura Myers and will produce two documents in time for summer trustee meetings. Firstly, it will provide a voting behaviour template and ‘pack’ for asset managers to fill out so that trustees can better compare and contrast engagement and voting behaviour, and to make it easier for trustees to produce their own disclosures. Secondly, the PLSA will produce practical, step-by-step guidance for schemes to achieving good practice on their implementation statements and responsible investment communications.

The working group’s guidance forms part of a wider initiative on investment and climate change being undertaken by the PLSA in advance of COP26. So far this year, that has already seen the release of PLSA’s new voting guidelines which clarified how investors should hold companies to account on climate change and, as a prominent theme at March’s Investment Conference where PLSA Chair Richard Butcher spoke on the subject.

Laura Myers, Chair of the Voting and Implementation Statement Working Group, PLSA, said:

“Many schemes are at the start of their journey when it comes to ESG and stewardship issues and after taking the time last year to document their policies they may now feel confused by the reporting requirements and how this applies to their scheme.

“Providing clear support and guidance will give a helping hand to both DC and DB trustees who are also currently grappling with the challenges of COVID-19. ESG issues are rising up the political and social agenda and I’m delighted that our group can help trustees be on the front foot to help improve standards across the industry and provide members with transparency on how their trustees have implemented these policies.”

Caroline Escott, Policy Lead Investment & Stewardship, PLSA, said:

“Although many schemes are rightly focusing on the ongoing implications of Covid-19, we must not lose sight of the new October obligations for many schemes to publicly disclose how they have implemented their ESG and stewardship approaches.

“We have been delighted with the response from industry to this project so far. We believe that working with members from across the investment chain will ensure we produce practical, accessible guidance for schemes which supports them in producing meaningful, high-quality communications on their ESG, stewardship and voting practices.”