DB Schemes at Odds with ESG Strategies of UK Firms

There is a “significant” misalignment between the corporate strategies of most UK firms and the ESG agendas of their defined benefit (DB) pension schemes, according to a survey by investment and fiduciary manager Cardano. Sixty-two percent of respondents said there were major differences, but the majority of these – 39% of all responses – said their firm was working with scheme trustees to address the problem. The issue was much more prominent at smaller schemes, with 51% of respondents from firms with schemes holding £50-100 million in assets admitting that aligning corporate and pension agendas on ESG themes was “not a corporate priority”. The survey was based on interviews with 227 CFOs, pension directors, and group treasurers at large UK firms with more than £200 million revenues and a DB scheme of £50 million or more in assets. It also found that CFOs typically lacked clarity on the financial implications of ESG issues for their firms and were often unprepared for climate-related regulatory changes. “Despite growing discourse around ESG risks, the fact that corporate agendas and their DB pension schemes’ ESG priorities are at odds with one another risks creating a zero-sum game where business and schemes are pulling in opposite directions,” said Michael Bushnell, Managing Director and Head of ESG Advisory UK, Cardano. “This lack of alignment represents a material risk for CFOs, with potential for either party to undermine good intentions and progress if external stakeholders find sponsors and trustees are out of step or even contradicting each other.”

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