UK FIDUCIARIES: Most investors agreed. The decision not to amend the rules on fiduciaries as ‘extremely’ disappointing.

In February, the government asked to change investment rules for funds in the private sector. This followed suggestions coming out from the Law Commission.

The Commission said that there was a case for amendments to the rules.

The Trustee must make a declaration in the Statement of Investment Principles. It relates to whether environmental, social and governance (ESG) concerns get accounted for in any decisions taken.

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Department for Work and Pensions

Instead, it said the new formulation should clarify how curators consider ‘financial’ and ‘non-financial’ factors. This is the preferred terminology of the Commission in place of ‘ESG’ – when investing.

The Department for Work and Pensions (DWP) responded to the consultation. They said a revision of the Regulations to provide differences between the two areas “would not necessarily provide more clarity for the trustees”.

The DWP argued that the trustees were responsible and aware of the importance to discuss such issues conducted. Their role also includes citing surveys of Pensions and Lifetime Savings Association (PLSA).

The ‘newly’ appointed lead of PLSAs protection and corporate governance was Luke Hildyard. He cited the same survey when arguing that the care of trustees themselves was their duty.

He supported the government’s decision not to change the regulation. His words clarified that he “shares the view that more prescriptive regulation on fiduciary duty is not justified at this time”.

Even so, Share Action noted something in the same PLSA survey. More than a third of respondents said their trustee boards were unaware of the law Commission’s report.

A review of the equity markets recommended the launch of the Investor Forum which triggered the report, published in 2014. Share Action chief Catherine Howarth insisted that the government needed ‘robust’ reasons to ignore the Commission’s recommendations.

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United Kingdom Social Investment Forum

The charity in 2014 drafted its own responsible investment account. They tried to take some of the proposals of the Kay Review in the law. UKSIF, Responsible Investment Association, also expressed their displeasure. They stated they were ‘very disappointed’ and ‘this was an important opportunity to help put UK finance on a sustainable basis. But, there was a failure’.

UKSIF noted that the DWP’s decision to issue only guidance seemed at odds with the view of the Department for Business, Innovation and Skills (BIS). They said in 2014 that it would ensure trustees were ’empowered’.

Howard argues that curators were trying to ‘do the right thing’. This was despite what the current regulatory background deserves. It should have ‘explicit’ regulatory support from the government. Any latecomers need it to protect member interests.

“The government says the guidance of regulators can see – that’s wrong,” he added. “The governments of the world are gathering in Paris to try to tackle climate change. If the threat is important enough for that, it is important enough to change some provisions”.

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