Pension power: new rules focus on investing for Good

Written by Lori Campbell on 18th Dec 2019

New rules covering workplace pensions will hold providers to account on their approach to investing for Good.

The revamped regulations, published by the Financial Conduct Authority, stipulate that Independent Governance Committees (IGC) are to oversee the approach of pension providers to environmental, social and governance issues (ESG).

The opinions and concerns of scheme members as to where their money is invested and how the firm addresses stewardship of the investments must also now be taken into account.

Commenting on the new rules, Hargreaves Lansdown senior analyst Nathan Long said: “Specific oversight of how pension investments consider social, ethical and governance issues in the sustainability of investments should lead to a renewed focus on using pensions to invest for good.”

It comes after Good With Money highlighted – in our Good Guide to Pensions – that a shocking nine out of ten workplace pensions are sitting in default investment funds that invest in the biggest companies in financial markets. This means tobacco firms, oil and gas majors, mining and big banks.

Long said that while the new rules change sets the stage for workplace pensions to do far more to tackle urgent environmental and social issues, it could take time for funds to accurately reflect the concerns of investors.

He said: “Initially this extra oversight will see some tinkering to the investments people are enrolled into automatically, they’ll probably look slightly more climate aware in the coming years than they do today.

“Over time we expect to see people given much more personal choice of where their money is invested, with more options that better reflect their personal values being included in company pensions. A big challenge for the IGCs will be how on earth they can take into consideration the views of members which are likely to be wide ranging on a variety of issues.”

The new rules will come into force on 6 April 2020, meaning that reports issued in early 2021 will have to take them into account.

If you would like to know the quickest and easiest way to change your pension for Good, check out our Good Guide to Pensions.


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