Under Trump 2.0, we are seeing a rise in anti-ESG claims in the US, particularly in the pensions industry with savers generally preferring to focus on purely financial returns rather than the potentially adverse environmental or social impacts of where their funds are invested. So far, it’s proving to be a completely different picture here with a widespread push for pension schemes to invest in UK-based investments since Labour’s General Election victory last summer. The Labour manifesto green finance agenda has been at the centre of recent pension legislation consultations, putting ESG policy to the fore.
With UK pension scheme trustees also facing increasing ESG reporting requirements, the largest schemes remain obligated to provide detailed reports on climate change-related investment. Earlier this month, the nation’s pension superfund, Clara, committed £3bn of investment in private UK markets. This embraces investments not traded on public exchanges which typically include private equity, real estate and infrastructure and are closely aligned with social impact investing.
Recently published research also highlights a strong feeling amongst the UK public, especially amongst younger savers, that their pension investments should positively contribute towards a better society. A survey by Moneyfarm found that 86% of Gen Z and 73% of Millennials would prefer to accept lower returns and work longer than see their pensions fund industries that may be detrimental to society or the environment. Meanwhile UK local government pension schemes remain dedicated to ensuring ESG is part of investment and stewardship strategies.
The Scottish Lothian Pension Fund, for example, is a signatory to the Principles for Responsible Investment and continues to actively engage with companies to meet its ESG aspirations. Scottish Widows has also responded to this demand with increased focus on ESG in default investments for workplace pensions. This includes using a process to screen out investments which violate international standards on human rights and labour, or engage in corrupt or environmentally damaging practices to ensure it can integrate ESG across investment decision points.
Amid the rising tide against the so-called "woke agenda’ in the US and the Trump administration’s accompanying anti-ESG rhetoric and actions, businesses and pension schemes in the UK continue to pursue a markedly different path. Through further political and social pressure, we are witnessing an ongoing rise in both ESG-friendly investment options and ESG-driven changes to many businesses’ practices. Leigh McLevy is an Associate and member of the Scotland ESG Team at law firm CMS Agenda is a column for outside contributors.
Contact: agenda@theherald.co.uk
