More transparency needed on ESG fund holdings, government survey finds

A government survey of defined contribution (DC) members found that many felt their chosen fund was not forthcoming beyond the top 10 holdings, while some ethical funds contained small print detailing the potential for investment in controversial trades.

The survey results, published by the Department for Work and Pensions (DWP), came as the government confirmed it would push ahead with reforms to mandate DC schemes and their trustees to disclose investment costs and charges information from April.

The poll of members, albeit small with 55 responses, found just 36% of schemes told members the names of funds in which their money was invested in without the member's request, and just 15% revealed the top five to 10 holdings of the funds.

Although 76% of the members who received the information said they understood some or all of the information that they received, many also called for it to be made clearer, particularly in relation to environmental, social and governance (ESG) issues.

In particular, one respondent said they found their money may be invested in sectors that they had specifically requested be excluded.

"I want full disclosure of the holdings of my fund, not just the top 10 companies. I chose an ethical pension because I do not want my money to fund military or weapons. My fund said it was a fit for me on this basis - but when I combed the small print, it says that no more than 10% of the fund will be invested in military or arms trade.

"This could still amount to billions of pounds is simply unacceptable to me. This should be made clearer, and there should be options that meet my values and requirements."

Another said they had no idea how their money was invested: "I'm in the ethical fund but it's not overly clear how my money is invested. I don't know which companies I have invested in which seems quite key. According to my provider, my money is invested in companies that do things like respect the environment and human rights but there is a lot of greenwashing out there so I would like to know who."

They added they were not sure who to contact or how to find the information they needed.

Last year, the UN-backed Principles for Responsible Investment (PRI) warned up to 200 firms could lose their signatory status because they had not demonstrated any more than lip service to ESG mitigation.

The DWP's current proposal is to create a duty on trustees and managers to disclose to members, upon request, information about the top holdings of their fund.

A ShareAction spokesperson said the members' comments were unsurprising, but the DWP's move was a step in the right direction.

"These comments are what we hear every day from ordinary savers and - while unsurprising - are no less an indictment of the sad state of affairs in the industry, which could be the only industry in the world that doesn't put its clients first," they said. "We should be able to find out easily where our money is being invested - transparency is just the basics! We're hopeful that these regulation changes are the first step to a more transparent and accountable pensions system."

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• Topics
• Investment
• department for work and pensions
• DWP
• Ethical Investment
• environmental, social and corporate governance
• ShareAction