Willis Towers Watson calls for refocus of trustee time – to “unlock real ESG action” in UK pensions

Trustees should focus action on two urgent priorities:

1. Climate Action
2. Long-term stewardship

Just eight additional hours per year focused on these priorities could allow trustees to begin driving real results.

LONDON, 3 November 2020 – Pension schemes looking to make a real impact on Environmental, Social and Governance (ESG) issues should target their efforts in order to deliver better outcomes, according to Willis Towers Watson.

Willis Towers Watson is calling for UK pension schemes to take immediate practical steps in two critical areas:

1. 01

   Climate Action

   Significant progress can be realistically achieved by all UK pension schemes by taking three practical steps:

   • Quantify climate risks – each scheme has its own specific risks inherent in its asset and liability profile
   • Identify climate opportunities – there is significant potential to improve returns and manage risk through the period of transition to a low carbon world
   • Implement a Carbon Journey Plan – the ‘how and when’ these risks and opportunities will be managed

2. 02

   Long-term stewardship

   Trustees are the stewards of the assets over the long term, and Willis Towers Watson believes a real difference can be made by taking the following steps:

   • Policy – set a clear stewardship policy
   • Engagement – review investment managers’ corporate engagement activities and hold them to account on material issues
   • Voting – review investment managers’ voting records on key ESG issues and guide their voting behaviour to be consistent with trustees’ investment objectives

Willis Towers Watson believes just eight additional hours per year from trustees can unlock real progress on these two key ESG priorities.

Based on analysis of typical trustee investment meetings, the additional time would be made up of two additional hours on each of the following activities:

• Training
• ESG strategy
• Portfolio review
• ESG monitoring

With eight hours per year of effective, action-orientated trustee time spent on ESG, pension schemes could begin to unlock significant impact and ultimately deliver better outcomes for members.

David Aleppo, Head of UK Investment Advisory Services at Willis Towers Watson, comments: “Acronyms are only useful if they spur action – and that applies to well-meaning ESG intentions too. We believe that trustees’ time is one of the most valuable levers available for bringing about lasting change. Reimagining the agenda of trustee meetings could unlock real ESG action by focussing on practical priorities.

“Two priorities will never be enough but they can be a vital first step. Underplaying climate change is a financial risk which must be reflected in Trustees’ decision making. Trustees should maintain a long-term focus and ensure that their asset managers do the same. Trustees’ stewardship roles can be a powerful mechanism for positive change in the investment industry. We see these two agenda items as a way for trustees to begin turning ESG aspirations into ESG action without significant time commitment.

“Increasingly, our most successful work with pension schemes has involved both a review of portfolios and also a review of trustees’ own highly valuable time.”

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.