ESG spotlight: A roundup of the latest news on environmental, social and governance initiatives, including the Society of Pension Professionals’ new guide to ESG, and Scottish Widows’ stewardship demands of its asset managers.
SPP: Prioritise ESG downside risk over opportunities
The SPP has warned that from a covenant perspective, the downside risk associated with ESG is “a far more important consideration” than the opportunities presented by climate change and ESG. In a new ESG guide, the SPP advised schemes to weigh up the scope of ESG risk for their sponsors “proportionately”, observing that schemes shortly moving towards buyout will have different priorities to those that will either remain open or reliant on a sponsor in the long term. It added that ESG ratings are useful “but not a substitute for proper understanding of the relevant risks” to covenant.
Scottish Widows urges managers to sign UK Stewardship Code
Scottish Widows has asked its asset managers to sign up to the UK Stewardship Code by 2024. The appeal was part of the provider’s 2021 stewardship report, which also set out its stewardship activities over the past year. These included a pledge by Scottish Widows to make £20bn to £25bn worth of “climate-aware” investments by 2025, and to relaunch its Environmental Fund to be entirely free of fossil fuels. It emphasised the need for pension funds to promote ESG stewardship through voting, engagement and divestment, with the provider hoping that by all of its managers becoming signatories to the code, it will be able to ensure that its investments meet “the absolute highest standards of stewardship”.
