17th december 2018, - transparency task force€¦ · - julia dreblow, director, sri services &...

17th December 2018,

Sacker & Partner LLP, 20 Gresham Street, London EC2V 7JE.

Welcome to

Stuart O’Brien, Head of ESGSacker & Partners LLP

on

"ACCELERATING OUR JOURNEY TOWARDS A GREEN ECONOMY,

BEFORE IT'S TOO LATE"

Welcome to

Andy Agathangelou, Founding Chair,Transparency Task Force

on

"ACCELERATING OUR JOURNEY TOWARDS A GREEN ECONOMY,

BEFORE IT'S TOO LATE"

Mobile: +44 (0)7501 460308 [email protected]

mailto:[email protected]

[email protected]: +44 (0)7501 460308

About

• We are the collaborative, campaigning community, dedicated to driving up the levels of transparency in financial services, right around the world

• We believe that higher levels of transparency are a pre-requisite for fairer, safer, more stable and more efficient markets that will deliver better value for money and better outcomes

• Furthermore, because of the correlation between transparency, truthfulness and trustworthiness, we expect our work will help to repair the reputational damage the sector has been suffering for decades


[email protected]: +44 (0)7501 460308

About mission

• We are an informal but increasingly influential forum of ethically-minded people that care about the financial services sector and the people it serves

• We are collaborative, collegiate and consensus-building; focusing on solutions not blame

• We believe the financial ecosystem is profoundly important to the wellbeing of society, the global economy and political stability; but there’s a great deal wrong with it that needs fixing

➢ Our mission: “To help Fix Financial Services by harnessing the transformational power of transparency”


• The Trust Deficit

• The Engagement Deficit

• The Understanding Deficit

• Hidden costs

➢ Hidden risks

• Opportunistic opacity

• Opportunistic obfuscation

• Short-termism

• Inadequate client-centricity

• Scams and scandals

[email protected]: +44 (0)7501 460308

What is➢ Asymmetries of information

• Regulatory Capture (USA?)

• A ‘profit before principle’ mindset

• Reputational damage

• Conflicts of interest

➢ Financial instability

• Malpractice, Malfeasance, Misconduct

• A general lack of market integrity

• Harmful incentive structures

• Miss-selling; and so on

helping to fix?

➢ How? - by shining a light into the darkness

➢ “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman” (Louis D. Brandeis, Other People’s Money and How the Bankers Use It, 1914)


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strategy for driving change:

Our Strategy for Driving Change is all about bringing togethor two groups of people:

#1, those with a sense of passion & purpose about what needs to be changed; such as the members of our SIGs

#2, those with the power & position to make change happen; such as the financial regulators

We do this in many ways, for example through our Transparency Symposia; and through our Special Events

Here are three wo very good examples of our Special Events:


‘The First Transparency Strategy Summit in the World’

‘The primary purpose of the first Transparency Strategy Summit in the world is to begin to build consensus on the best way to protect the interests of the UK’s pensions-saving public through full disclosure on all the costs and charges they are paying but not being told about’.

• 12th September 2016 at the Houses of Parliament

……which may have led to the opening of the Work & Pensions Select Committee’s Enquiry on Pensions Costs Transparency

5th Sept 2018 at the Commons:

x 110 (99 in the UK+ 11 overseas)13th Jan 2017

‘Launch of the TTF Banking Team’s White Paper on Current Accounts’

• 26th June 2017 at the Houses of Parliament

‘Sensible recommendations about the lack of transparency around charges for Free-If-In-Credit personal current accounts’

“Ideas to help reduce the chance of another Global Financial Crisis”

• 7th February 2018 at the Houses of Parliament

‘A special meeting at which we presented our White Paper on the topic and initiated the launch of a new All Party Parliamentary Group on Financial Stability’; the inaugural meeting is on 23rd May

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What do you see?


[email protected]

Today’s programme:10:30 Registration, refreshments and networking.

11:00 Welcome to the symposium by Stuart O’Brien, Head of ESG at Sackers

11:10Andy Agathangelou to introduce the Transparency Task Force and set the scene for the event, explaining its importance and how it fits into the TTF’s overall strategy for driving change.

11:30Presentation #1, delivered by Genevieve Marjoribanks, Head of Department, Cross-Cutting Policy at the Financial Conduct Authority.Genevieve will be explaining what the FCA are doing to help drive reforms through their Discussion Paper on Climate Change and Green Finance. The session includes Q&A.

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[email protected]

Today’s programme continued:

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12:05Presentation #2, by Jen Sisson, Senior Investor Engagement Manager, the Financial Reporting Council.

Jen will be explaining that the FRC will shortly be launching a consultation on a revised UK stewardship Code. The revisions include clearer expectations of different players in the investment chain, extending the scope of the code to include ESG integration in investment, monitoring and engagement and a new reporting regime designed to increase transparency and support the market for stewardship.


[email protected]


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12:40Presentation of the Transparency Trophy. Who will be the latest winner of this prestigious prize? It is awarded at each of our transparency symposia to an individual that is encouraging pro-transparency reform and improvements in market conduct.

Transparency Trophy winners are important people because of the way they are helping to lead the way forward.

12:55Lunch and networking.

14:00Presentation #3, by Neil Esslemont, Head of Industry Regulation, The Pensions Regulator; explaining what they are doing to help drive reforms through their 21st Century Trusteeship Programme and more. The session includes Q&A.


[email protected]


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14:30Presentation #4, by Stuart O’Brien, Head of ESG at Sackers. Stuart will be talking about trustee legal duties and forthcoming regulatory developments. The session includes Q&A.

15:00Presentation #5, by Andy Agathangelou, Founding Chair at the Transparency Task Force. Andy will be talking about some ideas to harness the awesome power of the Financial Regulators to help protect the planet and all the life on it.

15:30Refreshments and further networking.


[email protected]


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16:00The Power Panel and the Great Big Open Debate featuring:

- Nick Silver, CEO, Callund Consulting; Chairman, The Climate Bonds Initiative- Julia Dreblow, Director, SRI Services & Founder, The Fund EcoMarket- Nick Spencer, Resource and Environment Board Member, Institute & Faculty of Actuaries- Peter Uhlenbruch, Asset Owners Disclosure Project, Investor Eng. Officer, ShareAction

The Great Big Open Debate is where all attendees, speakers and panellists will have the opportunity to share their thoughts on the key issues raised by the symposium and ponder on what actions should be taken as a result of it.


[email protected]


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17:00Further networking; with drinks and nibbles.

18:30Final close


[email protected]

Let’s please show our appreciation to today’s sponsors:

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But before we go any further…



Genevieve Marjoribanks Head of Department, Cross-Cutting Policy, Financial Conduct Authority

20minutes + 5 minutes Q&A


• Asset Management• Pensions Team• Communications• Financial Planning➢ PISCES• Fintech• APAC• Americas• EMEA• GTI• Banking• Investment Consulting & Fiduciary Management• Governance, Compliance, Risk, Legal & Regulatory

[email protected]: +44 (0)7501 460308

➢ For more information including a list of all our 400+ volunteers see: https://www.transparencytaskforce.org/teams-of-volunteers/

AboutSpecial Interest Groups

✓ 400+ valiant volunteers✓ Organised & mobilised into 18 Special Interest Groups✓ Small groups of people working together✓ Subject-matter experts ‘that want to stand up, not stand by’✓ Building consensus on how to solve known problems✓ Not just ‘a talking shop’✓ One or more campaign objectives per team

• Market Integrity• Costs & Charges➢ Financial Stability• Foreign Exchange• Anti-Scams



Jen SissonSenior Investor Engagement Manager, Financial Reporting Council



Stewardship

Jen Sisson

Investor Engagement

November 2018

Who we are, what we do

The FRC’s mission is to promote transparency and integrity in business.

The FRC:

• Sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work;

• Monitors and takes action to promote the quality of corporate reporting; Operates independent enforcement arrangements for accountants and actuaries.

As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

Agenda

• A brief history of the UK Stewardship code

• Overview the Code – who should comply?

• Why are we reviewing the code?

• What is the plan for the future of the code?

A brief history of the UK

Stewardship code

• First published in 2010

• Updated in 2012

• Circa 300 signatories

• Tiering

Overview of the Code

• The UK Stewardship Code (PDF) aims to

enhance the quality of engagement

between investors and companies to help

improve long-term risk-adjusted returns to

shareholders.

https://www.frc.org.uk/document-library/corporate-governance/2012/uk-stewardship-code-september-2012

Who should comply?

• The FRC encourages all institutional investors to report if and how they have complied with the Code:

• Publishing a statement on their website of the extent to which they have complied with the Code,

• Notifying the FRC when they have done so and whenever the statement is updated.

• Providing a name in the statement of the individual who can be contacted for further information and by those interested in collective engagement.

Who should comply?

• The Code also allows service providers to disclose how they carry out the wishes of their clients with respect to each principle of the Code that is relevant to their activities.

• Since December 2010 all UK-authorised Asset Managers are required under the FCA's Conduct of Business Rules to produce a statement of commitment to the UK Stewardship Code or explain why it is not appropriate to their business model.

Why are we reviewing the code?

• SRD II

• DWP regs

• International codes

• The UN Principles for Responsible Investment

• The Law Commission’s 2014 report, Fiduciary duties of investment intermediaries

• Overall changing expectations – eg the EU High Level Expert Group on Sustainable Finance, the Sustainable Stock Exchanges group, the Social Impact Investing Taskforce

What are the problems with

Stewardship in the UK today?

• A disproportionate focus on short-term financial returns rather than sustainability of investments without consideration of the longer-term interests of ultimate beneficiaries.

• An outdated interpretation of the fiduciary duties owed to the various stakeholders held by some members of the investment community.

• Dispersed and fragmented ownership of the UK investment market, leading to small shareholders relying on large shareholders to navigate stewardship with companies, resulting in a free-rider problem.

• A lack of awareness and education from the asset owners about the benefits of stewardship, leading to some abdicating their stewardship duties creating little incentive for asset managers and investment consultants to pursue better standards of stewardship.

• Fee pressure on asset managers impacting investment in stewardship resources, which are already stretched by the large numbers of investments held by typical funds.

• The perceived ‘box-ticking’ practice of proxy advisors, and the limited transparency around their industry, along with voting infrastructure.

What are the common criticisms of

the current UK Stewardship Code?• The code is too focused on the relationship between asset managers and companies,

ignoring the rest of the investment ecosystem. This makes it hard to apply for asset owners and others, which impedes its ability to create a market for stewardship.

• The code is too focused on equity investment and doesn’t effectively speak to investments in bonds and other assets.

• The code does not make specific reference to ESG matters, putting it behind other international codes such as Australia and Japan.

• Reporting by signatories focuses on policies and principles, rather than activities and outcomes.

• Reporting by signatories is done at an organisational level and does not speak to differences of approach across different funds.

• The tiering process, although useful, has left too many signatories in Tier 1 and as such has not done enough to highlight the leaders in stewardship.

What is the plan for the future of

the code?• Raising the bar

• Differentiated responsibilities

• Incorporating ESG

• Pre and post investment

• Purpose, values and culture

• Asset classes

• Reporting requirements

• Enhanced Monitoring

Contact details

Jen Sisson

[email protected]

07854 876 431

020 7492 2442


[email protected]

• As well as shining a light on bad market practice the Transparency Task Force wants to shine a light on good practice and exemplary behaviour

• The Transparency Trophy is a top-quality transparent star, that winners keep

• The star-shape is significant - people can navigate using the stars so the star shape has been chosen to symbolise the idea that the winners are helping to navigate the industry towards a more transparent, and enlightened state.

• The winners are those that are leading the way for others to follow

• The Transparency Trophy is awarded to a winner at each of our Transparency Symposia

Mobile: +44 (0)7501 460308

About


[email protected]

• February 2016: Tomas Wijffels, Pensioen Federatie

• April 2016: Rachel Haworth, ShareAction

• June 2016: Jackie Beard, Morningstar

• September 2016: Gina & Alan Miller, the True & Fair Campaign

• October 2016: Robin Powell, Evidence-Based Investor

• November 2016: Daniel Godfrey, The People’s Trust

• December 2016: Ralph Frank, Cardano Risk Management

• February 2017: Con Keating, Brighton Rock Group

• May 2017: David Pitt-Watson, London Business School

• July 2017: Mike Barrett, The Lang Cat

• September 13th 2017: Steve Conley, Founder, Values Based Adviser

• September 28th 2017: George Kinder, Founder, The Kinder Institute

• November 15th 2017: Angela Brooks, Founder, Pension Life

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Previous winners of


[email protected]

• November 23rd 2017: Dr. Chris Sier, Independent Chair, FCA’s IDWG

• November 30th 2017: Dan Brocklebank, Head of UK, Orbis Investments

• March 8th 2018; Henry Tapper, Pension PlayPen, First Actuarial & AgeWage

• March 14th 2018; Bob Compton, Director, ARC Benefits Ltd

• May 24th 2018: Susan Flood, Vice Chair, Ark Campaign Group

• May 24th 2018: Nicholas Morris, Adjunct Professor, Faculty of Law, UNSW

• July 11th 2018: John Howard, Director, Consumer Insights

• July 26th 2018: JB Beckett, UK Lead, Association of Professional Fund Investors

• September 20th 2018: Heather Buchanan, Dir. of Pol. APPG/Fairer Business Bk’g

• 6th November 2018: Lesley Curwen, Reporter, BBC Freelance

• 14th November 2018: Dr. Kara Tan Bhala, President and Founder, Seven Pillars Institute for Global Finance and Ethics

➢17th December 2018 Won by Julia Dreblow,

Director, SRI Services & Founder, The Fund EcoMarketMobile: +44 (0)7501 460308

Previous winners of continued


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Lunch & networking break We restart at 14:00


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About today…1. We have run 24 Transparency Symposia; London x22, Boston x1, Hague x1

2. The Transparency Times goes to many thousands of people, monthly

3. We have awarded 24 Transparency Trophies

4. We have held 3 special meetings at the House of Commons

5. We have over 400 volunteers; organised and mobilised into 18 Teams

6. We have responded to 13 formal Government/Industry Consultations

7. Have had dozens of meetings & calls with Regulators & Government Officials

8. We have produced 8 Thought Leadership White Papers

9. We have gathered over 100 Transparency Statements

10. Have had 100’s of articles/comments published; on Radio 4 three times

11. Spoken at dozens of conferences and events

12. We are growing our presence in 18 countries

13. We have recruited 60 Ambassadors



Neil EsslemontHead of Industry Liaison,The Pensions Regulator



Dec 2018 DM 7400689 v1A These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

The information we provide is for guidance only and

should not be taken as a definitive interpretation of the law.

Transparency Task Force event:

‘Accelerating our journey towards a green economy, before it’s too late’

Sacker & Partners LLP, 20 Gresham St, London EC2V 7JE

Neil Esslemont

Head of industry liaison

17 Dec 2018

Pension Schemes

Increasing the focus on ESG


• Introduction

• The pensions landscape

• FCA / TPR joint pensions strategy

• 21st Century Trusteeship

Agenda


• Our role is to protect workplace pensions

• We are being clearer, quicker and tougher

• We are changing in five key areas:

− clarifying our identity

− setting clear expectations

− improving our regulatory oversight

− using a wider range of regulatory interventions

− being more efficient and effective

The evolving Pensions Regulator

Efficient and effectiveInterventionRegulatory oversight

Clear expectationsIdentity and

engagement


• One-to-one supervision is part of our evolving approach to protecting

and regulating pensions

• In addition to the process for authorisation and supervision of

authorised master trusts, supervision is being introduced for other

workplace DB and DC schemes in both the public and private sectors

➢ www.tpr.gov.uk/regulate-and-enforce/one-to-one-supervision.aspx

Driving compliance through supervision

http://www.tpr.gov.uk/regulate-and-enforce/one-to-one-supervision.aspx


2017 AE review - key findings


Participation in workplace pensions by sector


Where are AE contributions going?

Source: www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/automatic-enrolment-commentary-analysis-2018.ashx


What schemes are being used for AE?

Source: www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/automatic-enrolment-commentary-analysis-2018.ashx


6,000DB schemes

33,000DC schemes

Source: DB pensions landscape 2017 (March 2018)

and DC trust scheme return data 2017-2018 (January 2018)

The trust based pensions landscape


Current DB membership

Source: www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/db-pensions-landscape-2018.ashx

http://www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/db-pensions-landscape-2018.ashx

DM 6452274 v1C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.

Landscape

£1.5 trillion assets

6,050DB /

Hybrid

schemes

11m members

1.4m

active

member

16.5m members

447

Publicschemes

31,940Occupational

DC schemes

12.6m members

7.4m active

members

£48bn assets

£16bn

assets

9.9mmembers

6m

active member

Master Trusts

81MTs

9.9m employees

enrolled

AE 1m

employers

Source: Corporate Plan 2018 - 2021 www.tpr.gov.uk/doc-library/corporate-plans.aspx

http://www.tpr.gov.uk/doc-library/corporate-plans.aspx


Summary DB membership

Source: www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/db-pensions-landscape-2018.ashx

http://www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/db-pensions-landscape-2018.ashx


TPR research – retirement attitudes

INTEREST IN RETIREMENT PLANNING Total Ages

22-39

Ages

40-60

Never or very rarely think about it and don’t take any real interest 15% 18% 13%

Think about it occasionally and take some interest in it 51% 53% 49%

Think about it regularly and take quite a lot of interest in it 22% 16% 26%

Think about it a lot and take a lot of interest in it 10% 10% 10%

Don’t know 2% 3% 2%

ACTIONS IN LAST 12 MONTHS Total Ages

22-39

Ages

40-60

Logged on online to look at information about your pension 37% 39% 35%

Read key details of an annual statement or information

sent by your pension provider41% 40% 41%

Spoken to an IFA or other professional about my pension 13% 13% 13%

None of these 33% 33% 33%


FCA and TPR joint regulatory strategy

• Aimed at strengthening our relationship and taking joint action to deliver

better outcomes for pension savers and those entering retirement

• The strategy identifies key issues which contribute to the prospect of

people not having adequate income, or the income they expected in

retirement

• To tackle the main drivers of this, the FCA and TPR set out a vision for

the pensions sector over the next five to ten years - this includes making

clear areas of priorities and how to address fundamental changes

• TPR to use a broader range of regulatory interventions to address poor

governance and administration with proactive regulation of PS schemes

• www.thepensionsregulator.gov.uk/en/about-us/how-we-regulate-and-

enforce/fca-and-tpr-joint-strategy

http://www.thepensionsregulator.gov.uk/en/about-us/how-we-regulate-and-enforce/fca-and-tpr-joint-strategy


FCA / TPR strategy – objectives

Overarching harm

People not having adequate income, or the level of income they expected, in retirement

Key issues People struggling to maximise their pension savings

Money not being managed in line with savers’ needs

Pensions not being well looked after

People not being enabled to make good decisions

Areas of focus Access and participation

Funding and investments

Governance and administration

Consumer understanding and decision-making

Regulatory objectives

Pensions and retirement income products support people to increase their financial provision for later life

Pensions are well-funded and invested appropriately

Pensions are well-governed, well-run and deliver value for money

People access helpful information, guidance and advice that enables them to make well-informed decisions


FCA / TPR strategy – funding

Regulatory objective - pensions are well-funded and invested appropriately

Workstreams:

• More proactive use of a broader range of regulatory interventions on DB

funding

• Focus on DC default arrangement design and execution

• Implementing investment-related recommendations from the FCA Retirement

Outcomes Review

• Stronger regulation of and engagement with investment consultants and fund

managers

• Increased focus on Environmental, Social and Governance (ESG) factors

in investment decisions


Workstream: increased focus on Environmental, Social and Governance

(ESG) factors in investment decisions:

• Joint FCA and TPR responsibility

• Activities:

– DWP consultation on strengthening trustee duties relating to ESG

– work on new rules and guidance for IGCs and pension providers (FCA)

– review of permitted links rules to address perceived barriers to wider

pensions investment (FCA)

– updating investment guidance following patient capital recommendations

(TPR)

– potential amendments to rules and legislation against the backdrop of

the Shareholders Rights Directive and broader work on stewardship

(FCA and TPR)

FCA / TPR strategy – focus on ESG


TPR DB investment guidance (Nov 2018) ESG related recommendations:

• Trustees should take environmental, social and governance (ESG) factors into

account, if they believe they’re financially significant, and should take non-

financial factors into account if there is no risk of material financial detriment to

the fund.

• Trustees should include ‘Responsible Investment’ on their monitoring

dashboard covering:

– a report on approach and actions taken to incorporate ESG issues into

investment analysis and decision-making

– any ESG events/issues and any material changes to the ESG risks and

opportunities in the portfolio

– manager report on social impact of investments

• Trustees should monitor investment managers and evaluate the manager’s

actions regarding ESG factors and shareholder engagement

DB investment and ESG factors


European IORP II regulations

• UK regulations laid in Parliament on 23 October 2018

• Rules governing investment practices, including encouraging

consideration of environmental, social and governance factors

• Changes will not apply to Master Trusts and Public Service pensions …

• ... but will apply to all other occupational pension schemes – DB and DC

• More effective system of governance for trustees

• New requirement for schemes to carry out own risk assessment every 3

years or following any significant change

• Risk assessments should review how environmental, social and

governance factors are taken into consideration in investment decisions

• Greater transparency and disclosure of information to scheme members

• Amendments to the cross-border regulatory framework


21st Century Trusteeship campaign

• Our aim is to drive up standards of governance and trusteeship across the

landscape (defined contribution, defined benefit and public service

pensions):

• How will TPR do this?

➢ being clearer on the standards we expect from trustees and key

players and communicating these expectations

➢ bolder enforcement where basic compliance requirements are not

met (ie scheme return completion)

➢ encouraging consolidation where trustees are unwilling or unable to

deliver good governance, including value for members

www.tpr.gov.uk/21st-century-trusteeship.aspx

http://www.tpr.gov.uk/21st-century-trusteeship.aspx


21st Century Trusteeship - good governance

• Good governance - an essential part of effective scheme management

• Clear link between good governance and good fund performance

• Requires the right structures and processes in place to provide:

– motivated, knowledgeable and skilled trustees

– effective, timely decisions

– management of scheme and funding risks

– clear scheme objectives

• Good governance provides effective oversight of:

– administration and record keeping

– funding

– communication with members

• TPR is focused on poor governance as an indicator of wider failings


21st Century campaign themes

Goodgovernance

Clear roles & responsibilities

Clear purpose & strategy

Competence & integrity

Up-skilling & training

Managing advisors &

service providers

Managing conflicts of

interestManaging risk

Meetings & decision making

Value for members


PTSWG - Professional Trustee Standards

Working Group

• Established in 2017, PTSWG is an industry led group that aims to raise

standards in the market and eliminate poor practice

• Primarily focused on behaviours not processes (so avoiding a tick box

exercise)

• Accreditation framework in development - professional trustees will be

expected to attain this

• The number of trust based schemes (particularly defined contribution)

likely to reduce in coming years

• TPR will encourage consolidation where acceptable governance standards

are not met


• Prototype dashboard

delivered by the ABI

• Currently pensioner income

is 50% state and 50%

private pension (source

Pensions Policy Institute)

• Scheme participation

expected to be mandatory

with some exceptions

• DWP has now issued a

consultation paper - see:

https://www.gov.uk/government/

consultations/pensions-

dashboards-feasibility-report-

and-consultation

Pensions dashboard

https://www.gov.uk/government/consultations/pensions-dashboards-feasibility-report-and-consultation


Any questions?


Useful links

• FCA/TPR joint strategy - https://www.thepensionsregulator.gov.uk/en/about-

us/how-we-regulate-and-enforce/fca-and-tpr-joint-strategy

• Law Society paper - Pension Funds and Social Investment

https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-

11jsxou24uy7q/uploads/2017/06/Final-report-Pension-funds-and-socia....pdf

• Law Society paper - Fiduciary Duties of Investment Intermediaries

https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-

11jsxou24uy7q/uploads/2015/03/lc350_fiduciary_duties.pdf

• FCA Retirement Outcomes Review -

https://www.fca.org.uk/publication/market-studies/ms16-1-3.pdf

• TPR DB Investment guidance - https://www.tpr.gov.uk/-

/media/thepensionsregulator/files/import/pdf/db-investment-guidance.ashx

• TPR DB annual funding statement 2018 - https://www.tpr.gov.uk/document-

library?res=/-/media/thepensionsregulator/files/import/pdf/db-annual-funding-

statement-2018.ashx

• About TPR - www.tpr.gov.uk/about-us/protecting-workplace-pensions.aspx

• Codes of practice - www.tpr.gov.uk/doc-library/codes.aspx

https://www.thepensionsregulator.gov.uk/en/about-us/how-we-regulate-and-enforce/fca-and-tpr-joint-strategy

https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2017/06/Final-report-Pension-funds-and-socia....pdf

https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/03/lc350_fiduciary_duties.pdf

https://www.fca.org.uk/publication/market-studies/ms16-1-3.pdf

https://www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/db-investment-guidance.ashx

https://www.tpr.gov.uk/document-library?res=/-/media/thepensionsregulator/files/import/pdf/db-annual-funding-statement-2018.ashx

http://www.thepensionsregulator.gov.uk/about-us/protecting-workplace-pensions.aspx

http://www.tpr.gov.uk/doc-library/codes.aspx


We are here to help!

Request a guest speaker:

https://secure.thepensionsregulator.gov.uk/speaker-request.aspx

Contact us at:

www.tpr.gov.uk/contact-us.aspx

Subscribe to our news by email:

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For a full list of all our research and analysis:

www.tpr.gov.uk/doc-library/research-analysis.aspx

Thank you

The information we provide is for guidance only and should not

be taken as a definitive interpretation of the law.

secure.thepensionsregulator.gov.uk/speaker-request.aspx

http://www.tpr.gov.uk/contact-us.aspx

https://forms.thepensionsregulator.gov.uk/subscribe.aspx

http://www.tpr.gov.uk/doc-library/research-analysis.aspx

[email protected]: +44 (0)7501 460308

Sponsorship is mission critical for the Transparency Task Force

✓ Andrew Mills, Director, Insight Financial

✓ James Daley, Managing Director, Fairer Finance

✓ Valborg Lie, Director, Borg Consulting

Thank you!

Individual Sponsors so far, £100 each:


[email protected]: +44 (0)7501 460308


✓ Mark Evans, Business Development DirectorTavistock Investments PLC

Bronze Corporate Sponsors so far, £1,000 each:

✓ Matthew Simms Director, Asset Solutions River & Mercantile Solutions


[email protected]: +44 (0)7501 460308


Silver Corporate Sponsors so far, £5,000 each:


[email protected]

Gold Corporate Sponsors so far, £10,000 each:

Mobile: +44 (0)7501 460308


✓ Dan BrocklebankDirector,Orbis Access UK Ltd

✓ Saker NusseibehChief Executive Officer, Hermes Investment Management


[email protected]: +44 (0)7501 460308


Platinum Corporate Sponsors so far, £25,000 each:


[email protected]: +44 (0)7501 460308


Diamond Corporate Sponsors so far, £100,000 each:


Venues wanted for Transparency Symposia in:The Americas

Boston

New York

Washington D.C.

Chicago

San Francisco

Los Angeles

Santa Monica

Toronto

Ontario

Montreal

Vancouver

EMEA

London

Paris

Brussels

Frankfurt

The Hague

Amsterdam

Berlin

Dublin

Zurich

Geneva

Dubai

Cape Town

Johannesburg

APAC

Sydney

Melbourne

Auckland

Tokyo

Singapore

Hong Kong

Beijing

Shanghai

➢ Do you or any of your contacts have a venue we can use that seats 30+?


Stuart O’BrienHead of ESG,Sacker & Partners LLP



76

Accelerating our journey towards a green

economy, before it’s too late

The legal perspective

Stuart O’Brien, Partner

17 December 2018

TTF Symposium – 17 December 2018

77

What am I going to cover?

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Legal terminology / scene setting

Pensions regulatory developments (…briefly)

That old chestnut - the trustee “fiduciary duty”

How to get trustees moving


78

Defining some terms• Responsible Investment?

• Sustainable Investment?

• SRI?

• Thematic / Factor-based

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ESG

Impact

Ethical / Faith-based

Financial factors

Non-financial factors

“Non-Traditional” Financial factors


79

Spectrum of Capital

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Source: Bridges Fund Management


80


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Pensions regulatory developments




81

Recent Regulatory and other developments

• July 2014: Law Commission Report on Fiduciary Duties

• September 2015: Mark Carney speech on the Tragedy of the Horizon

• December 2015: Paris Agreement on Climate Change (COP 21)

• January 2016: Article 173 of the French Energy Transition Law in force

• December 2016: IORP II published

• March 2017: tPR Investment Guidance published

• June 2017: Law Commission Report on Pension Funds and Social Investment

• June 2017: EU Shareholder Rights Directive published

• June 2017: TCFD Final Recommendations published

• November 2017: Industry Report - Growing a culture of social impact investing in the UK

• November 2017: Environmental Audit Committee launches Green Finance Inquiry

• January 2018: HLEG Final Report on Sustainable Finance

• March 2018: European Commission Action Plan for a Greener & Cleaner Economy

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Recent Regulatory and other developments (cont.)

• March 2018: Environmental Audit Committee (EAC) writes to top 25 Pension Funds

• May 2018: European Commission legislative proposals on sustainable finance

• June 2018: EAC publishes Final “Greening Finance” Report

• June 2018: DWP launches consultation on “clarifying and strengthening

trustees’ investment duties”

• September 2018: DWP publishes response to consultation and new Regulations laid

• September 2018: TCFD releases its first Status Report

• October 2018: IPCC publishes special report on the impacts of global warming of 1.5 °C

• October 2018: The Occupational Pension Schemes (Governance) (Amendment)

Regulations 2018 laid before Parliament

• October 2018: PRA launches consultation on “Enhancing banks’ and insurers’

approaches to managing the financial risks from climate change”

• October 2018: FCA publishes discussion paper on Climate Change and Green Finance

• December 2018: Katowice Climate Change Conference (COP24)

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The Pension Protection Fund (Pensionable Service) (Amendment and

Modification) and Occupational Pension Schemes (Investment and

Disclosure) (Amendment) Regulations 2018

▪ Require trustees to update their SIP by October 2019 to set out their policies in relation to:

▪ “financially material considerations” - which are defined as including (but not limited

to), environmental, social and governance considerations (including climate change)

over the appropriate time horizon of the investments, including how those

considerations are taken into account in the selection, retention and realisation of

investments;

▪ the extent (if at all) to which non-financial matters are taken into account in the

selection, retention and realisation of investments;

▪ the exercise of the rights (including voting rights) attaching to the investments and

other engagement activities.

▪ Trustees of “relevant schemes” (broadly, DC) must also publish an annual “implementation

statement” to tell members how, and the extent to which, the SIP has been followed during

the year and certain other related matters.

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84

The Occupational Pension Schemes (Governance) (Amendment)

Regulations 2018

▪ Require tPR to update their Internal Controls Code of Practice to align it with various

IORPII requirements, including that trustees should carry out an own risk assessment on

how they assess new or emerging risks, including:

Reg 3(8)(h)

▪ “where environmental, social and governance factors are considered in investment

decisions, how the trustees or managers assess new or emerging risks,

including:

(i) risks relating to climate change, the use of resources and the environment;

(ii) social risks; and

(iii) risks relating to the depreciation of assets as a result of regulatory change.”

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85


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86

The Trustee fiduciary duty is?

to maximise short term returns?

to maximise returns over a time horizon appropriate to the trust?

to maximise risk adjusted returns over a time horizon appropriate to the trust?

to act in the best interests of the scheme’s beneficiaries?

to act as a socially responsible investor concerned for the quality of life of a scheme’s beneficiaries?

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87

A reminder what the Law Commission said in 2014?

• “[T]he law is confusing and inaccessible.”

• “Trustees are required to apply their minds to the right issues, and go

through the decision in the right way, but there is no single point of

reference to tell them how to do this.”

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The Law

Commission:

“Trustees should

take into account

factors which are

financially

material to the

performance of

an investment.

These may

include

environmental,

social and

governance

factors.”


89

Where do trustees tend to get stuck?

“I need to know that this won’t harm my returns”

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90

The challenge for the pensions lawyer:

…to change the emphasis:

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Exercise investment power for its proper

purpose

Act in accordance with the prudent person principle


91

What is the purpose of a trustee’s investment power?

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92

The key: the “Prudent Person”

A fiduciary must discharge his or her duties with the care, skill, prudence

and diligence that a prudent person acting in a like capacity would use in

the conduct of an enterprise of like character and aims.

• Behaviourally-oriented rather than outcome-focused

• Prudence, not prescience

• Not a static concept

“What the prudent man should do at any time depends on the economic

and financial conditions at that time — not on what judges of the past,

however eminent, have held to be the prudent course in the conditions of

50 or 100 years before.”4138-2060-9049 v.1


93

Cumulative number of policy interventions per year (counting individual revisions separately)

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Source: PRI responsible investment regulation database


94

Climate change and the prudent trustee investor…

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95

A forceful “inevitable policy response” will be needed

to reduce emissions towards a 2°C trajectory

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Source: UN PRI – The Inevitable Policy Response to Climate Change


96


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97

Top tips from the field:

1. Talk to trustees in their language:

– Prudent investors

– Stop talking about member views, ethics and non-financial factors

– Leave impact investment for those further along their ESG journey

2. Get beyond the Investment regs

– Minimum compliance with a regulatory disclosure obligation is not being a good trustee

3. Be proactive not apologetic

– Encourage trustees to take proper time on training

– Get trustees to set ESG investment beliefs and revisit annually

– Get trustees to think about disclosure frameworks to drive best practice

– Be honest about the legal risk of inaction – especially for DC default funds

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98

Top tips from the field (cont.):

4. Be realistic

– Start with what you’ve got: measure, consider, react, adjust

– Talk to the managers you already have

– Set aspirations over a realistic time horizon

5. Beat up the investment consultants

– For most schemes they drive the agenda and the manager reviews

– Some are proactive…. Many are not

– Committing to “flag TPR guidance” is not enough

– Presenting updated template SIP wording should be a hanging offence!

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TTF Ambassadors: UK

David Pitt-WatsonExecutive Fellow

London Business School

Daniel GodfreyCo-Founder

The People’s Trust

Catherine HowarthChief Executive Officer

ShareAction

Con KeatingHead of Research

Brighton Rock Group

Ralph FrankCEO DC (UK)

Cardano

Steve ConleyFounder

Values Based Adviser

Henry Tapper, Founder, Pension PlayPen;

Director, First Actuarial Markus Krebsz,The United Nations Group

of Experts on Risk Management

in Regulatory Systems

TTF Ambassadors: UK continued

Philip MeadowcroftIndependent Shareholder

Activist

Rory MaguireCEO

FundhouseIan Peacock

Chief Client OfficerIG Group

Dr. Anna TilbaAssociate Professor in Strategy and

Governance, Durham University Business School

JB BeckettUK Lead, Association of

Professional Fund Investors

Robin PowellFounder

Evidence-Based Investor

Jackie BeardDirector of Manager Research, EMEA

Morningstar

Mark PolsonFounder and Principal

the lang cat


Mike BarrettConsulting Director

the lang cat

Julia DreblowFounder SRI Services & Fund EcoMarket

Helen Scott,Chief Executive Officer,

Eris FX

Andrew Parry,Head of Sustainable Investing

Hermes Investment Management

James DaleyManaging Director

Fairer Finance

Will PriceGlobal Pensions Consultant

The World Bank

David StrippProposition Manager

David Stripp Ltd

Jon SpainTreasurer

Law for Life


Sunil ChaddaAdvisory Board Member

Association of Professional Fund Investors

Ruston Smith,Chairman,

Tesco Pension Fund Trustee Board, Tesco DC Governance

Committee, Tesco Pension Investment Limited

Mark Falcon,Founder and Director,

Zephyre

Bob ComptonManaging Director

ARC Benefits LimitedWendy Addison

CEO SpeakOut SpeakUp

Andrew MillsFounder and Director,

Insight Financial Research

Joe St Clair UK Director

World Sustainability Development Forum

Professor Michael MainelliExecutive Chairman

Z/Yen Group

TTF Ambassadors: Italy

Francesco Briganti,Secretary General,

Cross Border Benefits Alliance - Europe

TTF Ambassadors: Holland

Tomas Wijffels,Senior Policy Advisor,

Pensioen Federatie

Eric Veldpaus,Founder, Institutional

Benchmarking Institute

Peter Kolthof, Partner and Head of the Netherlands,

Avida International

Pascal Hogenboom,Associate Director,

Strategia Worldwide

TTF Ambassadors: USA

Paul Secunda, Professor of Law and Director,

Labor and Employment Law Program

Marquette University

Bernie Nelson,President,

Style Research,North America

Dr. Kara Tan Bhala,President and Founder,

Seven Pillars Institute for Global Finance and Ethics

Matthew Murray,Co-founder,

The Center for Business Ethics andCorporate Governance

George Kinder,Founder,

The Kinder Instituteof Life Planning

Stephen DavisAssociate Director and Senior Fellow,

Programs on Corporate Governance and Institutional Investors,

Harvard Law SchoolJon Lukomnik,Executive Director,

Investor Responsibility Research Institute

Richard Field,Founder, The Institute for

Financial Transparency

TTF Ambassadors: USA continued

Darby HobbsFounderSocial 3

Chris TobeFounder

Stable Value Investments

Lorelei GrayeFounder

Leodoran Financial

Adam ChoppinInvestment Director

FIS Group

Greg RogersCo-founder

Eratosthenes

Charlie AtkinsCo-founder

Envonet

John Spoto,President and Founder,

Sentry Financial Planning

Helene Spoto,Co-Owner,

Sentry Financial Planning

TTF Ambassadors: USA continued

David Rowe,President,

David M. Rowe Risk Advisory

Michael Erlanger,Founder and Managing Principal,

Marketcore.com

TTF Ambassadors: Canada

Larry ElfordFounder,

Investor Advocates

Larry BatesFounder,

The Wealth Game

Paul Bates,Senior Counsel,

Paul Bates Barrister

TTF Ambassadors: Australia

Ian Fryer, Head of Research,

Chant West, Sydney David Knox,

Senior Partner, Mercer Melbourne

Dr. Nicholas Morris,Adjunct Professor,

University of New South Wales,Sydney

TTF Ambassadors: Ireland

Paddy Delaney,Founder,

Informed Decisions Blog and Podcast


Andy AgathangelouFounding Chair, Transparency Task Force



“Enough is enough”


• I believe that society as a whole needs a mindset of ‘managed urgency’ towards the risk of climate change catastrophe

• I believe there is an urgent need for the financial services sector to play a full and leading role in defending the planet and all the life on it against the risk of climate change catastrophe

• I believe we should dare to dream that the world’s capital markets could become a powerful force for good

• I believe we should bravely and courageously imagine the potential impact we might have if we worked together on something very special and very important; that we can all strive to achieve

• I believe this could be the most important thing we may ever do.



• What if we could substantially boost the demand for ‘responsible’ investing & help move capital away from harmful companies?

• The impact could be radically transformational

• It could help set free the capital markets to become a ‘force good’ and not what they are now; slaves to the foolish and futile idea of creating short-term profits regardless of the long-term consequences to our planet and all the life on it

• The key to doing this would be to harness the awesome power of the finacial regulators

• The financial regulators make the rules; the markets must obey

• Maybe we can help them to introduce important planet-friendly rules through their consultation processes?

• Please consider these ideas:

We can make a difference


[email protected]: +44 (0)7501 460308

The Regulatory Requirements

Three key tenets of FS regulation:

• Know your client (not just AML!)

• Assess suitability

• Give suitable advice


[email protected]: +44 (0)7501 460308

Harnessing the awesome power of the regulatorsIdea #1, regarding the retail market

• Perhaps the FCA could require Independent Financial Advisers to ask their clients an important question

• “As an IFA I am required to ‘know my client’ before advising them [Standard questions on affordability, time-frame, accessibility and general attitude to risk]”

➢ Plus a specific question relating to the financial risks connected to climate change; such as:

“Do you have any particular risk-based preferences I should take into account when recommending investment solutions? For example, would you like to avoid investing in companies whose share price might be adversely affected by climate change?


[email protected]: +44 (0)7501 460308

• Hopefully, investment consultants and fiduciary managers will be brought into the regulatory perimeter as a consequence of the Competition & Market Authority’s recent investigation; looks likely it will be FCA plus TPR

• If so, perhaps the FCA and TPR could require investment consultants and fiduciary managers to fully consider the financial risks associated with investing in companies whose share price might be adversely affected by climate change

Harnessing the awesome power of the regulatorsIdea #2, regarding the institutional market


[email protected]: +44 (0)7501 460308

• Maybe investment consultants and fiduciary managers will have a responsibility to ensure pension trustees have sufficient knowledge on the financial risks of climate change?

Harnessing the awesome power of the regulatorsIdea #2, regarding the institutional market continued


[email protected]: +44 (0)7501 460308

• Consider the way that Muslim people tend to invest – they invest in Shariah-complaint funds because doing so aligns with their beliefs

• Financial advisers know to be sensitive to those beliefs and therefore recommend Shariah-compliant funds

• As a consequence there is a healthy selection of suitable funds available

• Is the concept of a religion based on beliefs?

➢ If somebody unknowingly invests in companies they would rather not (for example a Green voter unknowingly investing in high-carbon companies) do they have any basis on which to demand compensation for being made to behave in a manner contrary to their beliefs?

• What is the legal and regulatory view of this?

• Is it true that trustees of pension schemes in the USA are already exposed to class action litigation on such issues?

Harnessing the awesome power of the regulatorsIdea #3, regarding values-based preferences


[email protected]: +44 (0)7501 460308

• #1 - Join TTF’s PISCES Special Interest Group to help us develop the ideas I have spoken about and others; we have quarterly conference calls so it isn’t too onerous at all. The next call is on Wednesday 9th January at 0900, for just 30 minutes. Email me if you want further details

• #2 - Join TTF’s Response Team to the FCA’s brilliant consultation on climate change and green finance; we have until 31st January to respond. Email me if you want your thoughts and ideas included

Suggested actions


[email protected]: +44 (0)7501 460308

In conclusion• There are many problems in life we cannot do anything about; for

example, sometime’s it’s a tragic case “wrong place, wrong time”

• Climate change is not something we can do nothing about


[email protected]: +44 (0)7501 460308

Refreshments & networking break We restart at 16:15


[email protected]

Upcoming TTF Events

Mobile: +44 (0)7501 460308

Wednesday 16th January:

“CMA’s Final Report into the investment consulting and fiduciary management market.”

Venue - Burges Salmon, 6 New Street Square, London, EC4A 3BF


[email protected]

Nick SilverCEO, Callund Consulting; Chairman, The Climate Bonds InitiativeJulia DreblowDirector, SRI Services & Founder, The Fund EcoMarketNick SpencerResource and Environment Board Member, Institute & Faculty of ActuariesPeter UhlenbruchAsset Owners Disclosure Project, Investor Engagement Officer, ShareAction

Mobile: +44 (0)7501 460308

The Power Panel & the Great Big Open Debate


[email protected]: +44 (0)7501 460308

Key conclusions, wrap-up & close to the proceedings

• Remember to join PISCES please

• Remember to join our Response Team to the FCA’s Consultation

➢ We are planning a follow-up event for June; VENUE WANTED PLEASE

• Would you like to be included in the June symposium

• Please pop me an Email if you might want to be


[email protected]

Our work is done, for today!

Thank you for your attendance, input and ongoing support!

Optional networking and refreshments until 18:30 courtesy of

Mobile: +44 (0)7501 460308

Andy AgathangelouFounding ChairTransparency Task Force


[email protected]: +44 (0)7501 460308

Many thanks again to today’s sponsors and everybody else for taking part so fully!


17th december 2018, - transparency task force€¦ · - julia dreblow, director, sri services &...

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