New government regulations have granted pension scheme members more power in viewing the sustainable investment activity of their accounts.

Under the proposals, pension fund trustees will now be required to produce statements assessing the environmental, social, and governance (ESG) factors of their investment decisions. Members will have access to the assessments and be able to make their own evaluation of the efforts taken to combat ESG risks.

The recommendations follow a joint response from the Department for Work and Pensions (DWP), the Department for Digital, Culture, Media, and Sport (DCMS) and the Financial Conduct Authority (FCA) regarding the 2017 Law Commission report on pension funds and social investment.

With more than £1.5tn invested in pension schemes, the regulations also call for drafted "stewardship" policies, encouraging trustees to consider how their investments reflect members' views.

Esther McVey, secretary of state for work and pensions stated: "As we see the younger generation who care more about where their money is going, they are also increasingly questioning that their pensions are invested in a way that aligns with their values. This money can now be used to build a more sustainable, fairer and equal society for future generations."

The regulations require new statements of investment principles (SIPs) for trust-based schemes to be enacted before October 2019, outlining how they plan to assess ESG risks. Reports detailing efforts made to support the SIP must follow each year after. The FCA has also planned consultation in early 2019 for implementing similar policies in contract-based schemes.

UKSIF welcomes the proposals supporting the increasing popularity of sustainable investment. For the past five years, UKSIF has been advocating for such rule changes.

"By taking these steps the Government and FCA are protecting pension savers from serious financial risks, and they are nudging pension schemes towards the opportunities which will arise as the economy takes the necessary steps to adapt to today's environmental, social and governance imperatives," said Simon Howard, CEO Of UKSIF. "All schemes, and not just the leaders, will have to recognise the world is changing."

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