The results, published July 15, did not include policy changes, with DWP saying that it is up to trustees to determine how to consider financially material social risks and opportunities.
While some pension funds and service providers reported managing social factors through engagement with companies and others in the investment chain, “there is clearly more to do,” Mr. Opperman said.
One issue raised by trustees was modern slavery within supply chains, which could be exacerbated by global events like the war in Ukraine. The war has also shifted the conversation about investing in defense and nuclear industries, he said.
“This time last year, industries such as defence and nuclear (both civil and defence) were seen as no-go areas for ESG funds but the situation has changed and ESG investing should change with it,” he said. “Recent events have reminded us — if such a reminder were needed — how vital these sectors are to the safety and security of our society.” Pension fund trustees should join the Occupational Pensions Stewardship Council to collaborate on collective engagement and best practices, and when they delegate stewardship, they should “ensure that asset managers do not leave social factors off the agenda,” Mr. Opperman said.
For his part, the pensions minister pledged to set up a task force to identify reliable data and metrics, “and ensure that focus on social factors continues to grow throughout the investment chain.” The task force will also help trustees figure out the investment risks from social factors, how to monitor them, and how to report in line with international standards.
A Department for Work and Pensions review during the consultation of statements of investment principles for 25 large defined benefit funds and 15 large defined contribution master trusts found that few differentiated between ESG factors or specifically addressed social factors, and instead often delegated to asset managers. For the minority of statements that did expand on social factors, common themes were gender diversity, labor standards and controversial weapons.
