ESG spotlight: A roundup of the latest news on environmental, social and governance initiatives, with an ACA survey finding that a third of pension schemes have already set targets to reduce climate risk, and asset management fees falling in some ESG and impact strategy types.
A third of pension schemes set targets to reduce climate risk
The Association of Consulting Actuaries has identified an emerging division in pension scheme attitudes to climate risk, with similar numbers of schemes saying that they do not intend to set climate risk targets as those who are in the process of setting these objectives. Twenty-eight per cent of 212 employers surveyed said their sponsored schemes will not be setting a target, while of the 33 per cent of respondents that have set or are in the process of setting these objectives, half have included an emissions-based target, with the majority (70 per cent) of these being a ‘net zero’ goal. Seventy-three per cent of defined benefit schemes have reviewed their sponsor covenant on the potential impact of climate change — a 9 percentage point improvement on last year’s findings. Patrick Bloomfield, chair of the ACA, said that it is “important to remember” that schemes exist to pay income to their members in later life, not to facilitate other social policy aims.
Fees fall for some ESG and impact strategies
The median fee for a €100m (£85.2m) mandate has decreased by 14 per cent since 2016, driven by a reduction in the cost of active global equity strategies with ESG requirements, research by investment consultancy Bfinance has found. The consultancy suggested that the “mainstreaming” of ESG investing has heightened competition for assets and resulted in a pricing refinement. According to new research, there could be a “modest premium” for impact and Article 9 equity strategies — funds targeting sustainable investments — as “managers in these more nascent sectors are more likely to offer substantial upfront discounts even before negotiation, as they seek to build up assets”, Bfinance stated. Similarly, management fees for renewable energy infrastructure strategies have fallen by 8 per cent since 2016 and performance fees have also declined. The decrease in fees has been accompanied by a fall in target returns, as well as a rise in the proportion of longer-term vehicles versus 10-year private equity-type fund models, it said. Fees for infrastructure strategies and private markets strategies, more broadly, have remained remarkably resilient, it added.
