By International Actuarial Association 

The paper summarizes the main features and trends in pension fund Environmental, Social and Governance (ESG) risk disclosures around the world available to regulators, members and the public. It includes reference to statutory requirements, general practice and voluntary disclosures in relation to pension fund accounts and other documents made available to members, such as benefit/fund statements.

We discuss the financial and reputational risks which ESG issues can present to pension fund investments and to long-term performance.
We refer to all types of pension fund, including defined benefit (DB) and defined contribution (DC), and multi-employer structures. The paper is based on a global survey of practices and legal requirements in various countries – including the main locations for employment-related pension funds – carried out during autumn 2019, and a review of best practice as illustrated by a selection of major pension funds.

Reference is made to disclosures relating to climate change and other ESG risks arising from the management of pension fund investments. There is particular reference to the take-up of the recommendations of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD).

Governance is considered in relation to corporations in which pension funds invest, and also in regard to the changing attitudes to stewardship policies adopted in managing investments, where the impact on all stakeholders may need consideration. We note the rapidly increasing environmental litigation which is starting to impact pension funds.
Our overall conclusion is that, apart from in many of the largest pension funds, ESG risk disclosure is limited in many parts of the world, but increasing rapidly as legislation is implemented, particularly in Europe. Pension fund investments are coming under increasing scrutiny.

For actuaries involved with pension funds, whether as trustees, investment managers, investment consultants or advisers on funding or governance, it is essential that they are aware of these trends so that they can ensure their clients or employers address the challenges on a timely basis.
In regard to the COVID-19 pandemic, much of the work on the paper was completed before it commenced, so there is only limited reference to it.

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