PLSA seeks views on new responsible investment quality mark for pension schemes

The Pensions and Lifetime Savings Association (PLSA) has opened a consultation on a new Responsible Investment Quality Mark (RIQM), intended to recognise pension schemes that meet the highest standards for incorporating environmental, social and governance (ESG) factors across their operations.

The RIQM has been developed amid an evolving regulatory environment and a momentum shift in public and industry attitudes towards climate change and ESG.

Last year pension schemes were required for the first time to publish an ‘implementation statement’ to disclose their voting behaviour and how they have delivered against their stewardship strategy.

From October 2021, funds over £5bn will be required to report against standards set by the Task Force on Climate-related Financial Disclosures (TCFD) on how they are considering the impact of climate risk on their investments.

Despite these regulatory changes, a survey of more than 2,000 UK adults commissioned by the PLSA last year found there remains a lack of understanding among savers as to how pension schemes are taking action against climate change. Three-fifths of workplace pension holders (59 per cent) said they don’t know if schemes are taking any action; just one in seven (15 per cent) workplace pension holders think schemes are.

The PLSA has focussed for several years on supporting schemes in their endeavours to implement Responsible Investment principles and practices. For pension schemes, our latest initiative, the Responsible Investment Quality Mark, provides: a new standard to which schemes can aspire; the opportunity to share best practice among schemes; and a scheme member-focussed way to demonstrate activities in this area.

For savers, the RIQM accreditation is intended to serve as an at-a-glance assurance that schemes bearing the RIQM logo are performing well against a broad range of standards across their operations, without having to wade through scheme literature in search of the relevant report or regulatory disclosure.

The proposed assessment process will require schemes to meet minimum standards across seven areas: understanding the needs and interests of their beneficiaries; governance; investment strategy; oversight of stewardship; risk management; the use of metrics and targets; and communication and engagement. Against each of these areas, schemes will be required to provide supporting evidence.

For schemes that are acting in ways that exceed best practice, we are also proposing an RIQM Plus accreditation. This will be available to schemes where they are demonstrating industry-leading practice.

The PLSA has a track record spanning more than a decade of assessing and accrediting pension schemes. The Pension Quality Mark recognises high quality pension schemes and employers that have high contribution levels, good governance and encourage members and employees to save for their future.

As with the Pension Quality Mark, compliance with the RIQM standards will be undertaken by a combination of internal PLSA staff and expert external assessors, with all decisions subject to potential review by the independent Pensions Quality Mark Standards Committee.

The RIQM is intended to be accessible for pension schemes of all types and all sizes with an assessment approach designed to respond intelligently and flexibly to the scale and resources of the relevant scheme, so that not only the largest and best resourced schemes will be able to qualify.