Progressing the ESG agenda for pension schemes: using the A4S ESG Maturity Map

This blog was written by Marcus Hurd, Professional Trustee

 

In the world of ESG, it’s far too easy to talk a good game without making a positive difference. A4S’s ESG Maturity Map for pension trustees helps pension schemes move beyond the rhetoric and build an actionable roadmap to implement environmental, social and governance (ESG) considerations in a meaningful way. In this blog, I share my experiences of using the maturity map to drive engagement and make positive progress towards an ESG aligned pension scheme investment strategy.

 

What it is

The ESG Maturity Map lays out, in plain English, a series of example behaviours for pension trustees to embed ESG considerations into a pension scheme’s strategy and processes. Set out across four levels of maturity, from level 1 ‘understanding’ to level 4 ‘leading’; the aim is to help trustees assess where they currently are and how they can advance to a leading position. I was asked by A4S to ‘road-test’ this tool with the Boards I sit on by workshopping the maturity map with my fellow trustees.

 

Taking control of the agenda

First and foremost, A4S’s ESG Maturity Map helps put the trustees back in control of the agenda. In my experience, conversations around the scheme’s ESG journey have almost always been led by the investment consultant community, with the trustees taking on more of a ‘listening’ mode. The ESG Maturity Map enabled me and my peer trustees to challenge and probe further into previous statements and responses from our investment consultants.

The maturity map focuses on tangible outcomes. This is important, because it provides a way to distinguish true ESG integration into the scheme’s operations from a tick-box exercise. For example, trustee boards often focus on training, discussion and monitoring reports. The maturity map places these actions in ‘level 1 – understanding’, prompting a stark realization that a fundamental change in mindset is required to move towards ‘level 2 – adopting’, ‘level 3 – deepening’ and ‘level 4 – leading’.

The maturity map splits priority actions into three focus areas: allocating funds to sustainable outcomes, engagement along the investment chain, and reporting and collective action. By going through these actions and agreeing as a Board where the scheme is on the maturity map, the trustees gain insight into which action areas they should prioritize. This naturally leads to a narrative which their consultants can address accordingly.

 

Trustee engagement

Gaining support for the maturity map workshop session amongst trustees is relatively easy. The session itself is only an hour in length and the preparation work is largely straightforward. A4S helpfully wrote a workshop brief to guide you through the process. As a result of that hour of time, all trustees acquire a common understanding of the issues, challenge their progress to date, and establish meaningful commitments that take the scheme forward.

The process provides a good opportunity to bring other key stakeholders to the table in this discussion. For example, the process can bring the trustees and sponsor together, enabling an alignment of interests, a sharing of perspectives and mutual commitment to the next steps required. The discussion also provides an avenue to explore further the sponsor’s own ESG considerations. It is also a great opportunity to bring in investment consultants and challenge the dynamics of the usual engagement sessions.

 

Commitments

The commitments are a key part of the maturity map workshop process. As mentioned, the map provides suggested actions for moving onto the next level. In some cases, this is an eye-opening moment. For example, a trustee board that has focussed largely on discussion, training and monitoring, will note that a Paris-aligned portfolio requires substantially more work than has perhaps taken place to date. Agreeing as a board a few near-term commitments not only helps to bring all trustees together on this agenda, but enables the agenda to be trustee-driven.

In conclusion, the time commitment for running the A4S ESG Maturity Map workshop is relatively small compared to the benefits achieved. It helps drive consensus within the Board and helps trustees take back control of the ESG agenda. The workshop builds a collaborative assessment of the current position, and the resultant commitments establish a clear roadmap towards progressing the integration of ESG considerations into the investment and strategic decisions of the Board.

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MATURITY MAP

Detailing what good looks like and enabling trustees to assess where they currently are and how they can advance to a leading position.

THE ESG TOOLKIT FOR PENSION CHAIRS AND TRUSTEES

This toolkit of resources supports chairs and trustees of pension schemes identify the practical steps to embedding ESG considerations into their investment decisions, reporting, and engagement across the investment chain. 

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