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Should regulators take the lead on ESG in pensions?
The extent to which financial regulators should get involved in setting environmental, social and governance requirements is a hot topic, with some experts arguing that involvement could stifle innovation.
In a recent twitter poll, Pensions Expert asked its readers whether or not regulators should take the lead on ESG within asset management. The result reflected how divisive the issue is in the industry.
The poll revealed 53.6 per cent of respondents felt regulators should intervene to meet demand for standardisation across ESG, while 42.9 per cent were opposed, claiming regulatory presence limits investor freedoms. Just 3.6 per cent responded that regulators should intervene because it helps investors.
A key issue is the lack of standardisation in the industry, with ESG issues still being a relatively new concept for many pension funds to engage with. Lars Hagenbuch, consultant at RisCura, argues this is evidenced by the lack of a data standard for funds to follow.
“Exactly how [ESG] will impact funds is not certain,” he says. “We are seeing considerable attention being placed on the statistics of ESG, where managers and underlying companies are coming under increasing pressure to show numerically what their carbon footprint or other environmental impact is and how it compares with various indices or peers.
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