The Pensions and Lifetime Savings Association (PLSA) has produced a guide to new investment disclosure duties for UK pension schemes, encouraging them to produce meaningful disclosures rather than just focussing on compliance.

Under new rules coming into force in October, defined benefit (DB) and defined contribution (DC) schemes face new requirements to publicly disclose, in an “implementation statement”, their investment and responsible investment activity over the previous year.

The requirement is for these statements to set out how and to what extent their activity followed the intent captured in the scheme’s statement of investment principles (SIP), which since a year ago must address trustees’ policies on financially material environmental, social and governance (ESG) factors.

Caroline Escott, outgoing senior policy lead on investment and stewardship at the PLSA, said the implementation statements were “a very new discipline for trustees”, and “will require them to carefully consider which investment decisions and activities have or will have the greatest impact on their investment objectives”.

The requirements differ for DC/hybrid and DB-only schemes, although common to both is a requirement to disclose their voting and engagement behaviour. Sarah Wilson, founder and CEO of proxy voting agency Minerva, said this was “a once in a generation shift in legal responsibilities” for trustees.

The PLSA’s guide sets out general principles as well as more detailed considerations for trustees to produce “relevant, succinct and meaningful statements”, with the association noting that “policymakers, the public and scheme members will be paying close attention” to the content of the implementation statements.

Be clear on vote ‘ownership’

On voting disclosures, the PLSA advises trustees to be clear about who “owns” the vote in their particular investment arrangements and along their voting chain.

It said it recognised that schemes with investments in pooled funds would have a different scope for influence compared with those with segregated mandates, but that it believed the former could still “exert their influence and seek to challenge their managers on their (engagement) and voting activity”.

The PLSA also said the avenues pension plans had for influencing investment, and particularly voting, decisions undertaken on their behalf would continue to change.

Trustees should keep an eye out on developments in the Law Commission’s work on intermediated securities, the HM Treasury’s asset management taskforce work on stewardship, and the EU sustainable finance initiative, among other areas, the association said.

“This guide aims to cut through some of the confusion around implementation statements”

Laura Myers, chair of the voting and implementation statement working group

The PSLA’s guide is the product of a new cross-industry working group and a stakeholder group comprised of representatives from government, regulators and industry organisations.

“This guide aims to cut through some of the confusion around implementation statements and give practical steps on how to collate this information and communicate it to stakeholders,” wrote Laura Myers, chair of the working group and a member of the PLSA policy board, in the introduction to the guide.

“We believe that the principles underpinning the implementation statements will help focus schemes on their long-term investment goals. Getting these disclosures right will help schemes become more sustainable, improve stakeholder relations and ultimately make better investment decisions that have the interests of members and savers at their heart.”

The cross-industry group is also working on a voting template for asset managers to fill in, and the PLSA is encouraging trustees to use this. IPE understands the template and guidance are being finalised and will be launched within the next few weeks.

The PLSA’s guide to the implementation statements can be found here.

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