Fiduciary managers are raising the bar in terms of the quality of their ESG offerings, but there is a gap between those leading and those lagging behind, EY research finds.
The professional services firm's report, ESG investing under fiduciary management, assessed how the £200bn UK pensions fiduciary management market is keeping pace with evolving ESG practices across six key areas - governance, risk management, investment integration stewardship, climate change, and reporting.
It found the majority of the 15 fiduciary managers it surveyed were either ‘leading' or ‘advanced' in terms of most ESG metrics - with only reporting generating a slightly less positive result.
How fiduciary managers score against six ESG pillars
Source: EY ESG investing under fiduciary management report, June 2023
EY's research also found there had been an increase in ESG specialists at fiduciary managers - noting most staff now receive ESG training, with all fiduciary managers surveyed having some form of responsible investment policy in place, and some putting in place specific ESG targets and policies.
In addition to this, it found almost 90% of fiduciary managers provided Taskforce on Climate-related Financial Disclosures (TCFD) reporting for at least one pension scheme this year - but noted that, despite this, a range of climate metrics and scenarios were being used, meaning the reporting narrative was not always clear.
EY found stewardship was the most mature ESG area for the fiduciary mangers surveyed, with 87% of fiduciary managers being signatories to the UK Stewardship Code, which continues to raise the bar on the standard of stewardship expected in order for asset owners and managers to retain signatory status.
This is EY's third industry-wide survey looking at how ESG is being incorporated by the fiduciary
management market - research it hopes will help the industry engage in "purposeful conversations about ESG" and help drive further developments in ESG.
In the report, EY commented: "The world is asking for change. It is clear that the ESG best practices, solutions and regulations continue to move at pace.
"We firmly expect topics such as biodiversity and integration of members' views to be areas of increasing importance going forward, with some schemes starting to look at these areas already. Furthermore, we expect to start seeing emerging consensus on how to assess ESG performance for different asset classes which should lead to improvements in data availability and reporting."
