The Investment Consultants Sustainability Working Group (ICSWG) has launched a guide to help trustees assess their investment consultants’ climate competency.
The ICSWG - a collaboration between 17 firms - was formed in 2020 to support and accelerate sustainable investment initiatives in the UK.
The guide - developed through collaboration between all 17 member firms and also has input from ShareAction, The Pensions Regulator and the PRI (Principles for Responsible Investment) - was designed to be a practical response to the 2020 Pensions Climate Risk Industry Group (PCRIG) consultation, which recommended that pension scheme trustees require their investment consultants and asset managers to demonstrate climate competence.
It sets out five themes against which trustees should expect their investment consultants to demonstrate their climate competency. These are:
- Firmwide climate expertise and commitment
- Individual consultant climate expertise
- Tools and software (to support climate-related risk assessment and monitoring)
- Thought leadership and policy advocacy
- Assessment of investment managers and engagement with them
Examples of positive and best practice indicators are also proposed for each theme to help trustees assess their consultants in each area.
ICSWG co-chair and Willis Towers Watson global head of research Luba Nikulina said: "The indicators are deliberately stretching with the aim of raising investment consultants' standards and it should be acknowledged that some of these indicators will be aspirational.
"However, this is an important step towards developing good practice and practical guidance for schemes, in particular those seeking to align with the recommendations of the Taskforce on Climate-Related Financial Disclosures."
ICSWG regulation team member and Mercer partner Brian Henderson added: "The framework illustrates areas where clients can hold consultants to account in terms of their competency in supporting evidence-based climate change related decisions.
"It is important that pension scheme trustees ask their consultants and asset managers to demonstrate a best practice approach to climate competence. We are already in the decade of transition and to deliver returns for our clients we need to understand the risks and opportunities that the transition will bring. The framework is a step in the right direction and we look forward to the value it will add to our industry."
ICSWG's regulation team member and Lane Clark & Peacock (LCP) partner Ian Gamon agreed: "Climate change is fast becoming the defining issue of our time and trustees of pension schemes need to know their advisers are on the front-foot with this issue."
Member firms of the ICSWG are: Aon, Barnett Waddingham, bfinance, Buck, Cambridge Associates, Cardano, Hymans Robertson, Isio, LCP, Mercer, MJ Hudson Allenbridge, Momentum, Redington, River and Mercantile, SEI, Willis Towers Watson, and XPS Investment.
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