Hymans Robertson, the leading pensions and financial services consultancy, is warning that DB pension scheme trustees are increasingly taking ESG considerations into account as they face buy-in decisions. They are being given this additional focus due to increasing environmental expectation of members. With buy-in becoming a more likely outcome for DB pension schemes, and growth in this area looking set to continue, the importance of ESG has never been greater for risk transfer.

The results of polling at a recent webinar held by the firm supported this as nearly two-thirds of trustees (62%) said that they are willing to pay a higher buy-in premium in return for an insurer with better ESG credentials. This insurer scrutiny looks set to continue as they begin to comply with new FCA rules¹ to make climate-related disclosures consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).  

Commenting on the growing impact of ESG within the risk transfer market, Paul Hewitson, Head of ESG for Risk Transfer said:

“The scale of investment within ESG presents a huge opportunity for the risk transfer market which can materially improve its position within this area and create real change. The willingness of insurers to move towards investing in a greener way must be recognised and this will benefit both pension scheme members and our wider society.

“The indications from our webinar poll, finding that nearly two-thirds of Trustees are willing to pay for better ESG credentials, demonstrates that there is a clear need for insurers to improve what they offer within this area and differentiate themselves in the marketplace. The importance of ESG will only continue to gain momentum and increase in importance to Trustees, and the risk transfer market.” 

¹ https://www.fca.org.uk/publication/policy/ps21-24.pdf