Pension funds are challenging asset managers over ESG — What you need to know

Pension funds have been pivotal in shaping the evolution of sustainable finance since the adoption of the Principles for Responsible Investment in 2006. Under the patronage of the United Nations, these funds have pushed banks and asset managers to integrate environmental, social and governance (ESG) factors into investment decisions and shareholder voting practices. Their financial weight is substantial, as pension funds, together with other institutional investors, control the majority of shares in publicly listed companies.

While the largest pension funds manage a portion of their assets in-house, the majority delegate this responsibility to investment specialists, or asset managers. In addition to management, the delegation of voting rights is often entrusted to asset managers or specialised organisations. Historically, the interests of pension funds and asset managers have been relatively aligned. However, this congruence is now undergoing a significant shift. Today, some pension funds oppose the anti-ESG rhetoric and executive orders that have emerged under the Trump administration in the US, and they expect their service providers to follow suit—a challenging feat for many asset managers. More…

Source: Covalence / illuminem