Guide to “best advice” for fiduciaries considering ESG risks and opportunities in the employer engagement process
Accounting for Sustainability (A4S) and the Employer Covenant Practitioners Association (ECPA) have produced a “Top Tips” guide for directors on integrating social environment and governance (ESG) into the process of evaluating employer commitments.
As the introduction suggests, assessing the strength of the employer’s commitment should be part of an integrated approach to managing the risks of defined benefit plans.
The guide examines the “why” and the “how” to integrate ESG considerations into the employer engagement process.
In particular, it suggests an approach for trustees and their advisers to:
1. Define Identify the relevant time horizon
2. Scope Broaden your understanding of sponsor-related ESG risks and opportunities
3. To research Gather relevant data and information and engage your sponsor and peers
4. Assess Leverage expert advice to assess potential impact
5. Engage Engage in evidence-based discussions with sponsor
6. Exam Measure, monitor and reassess accordingly
The guide can be accessed here.
The guide provides DB trustees and sponsors with practical steps on how to consider the impact of ESG risks as well as potential opportunities when assessing employer engagements. The suggested practical approach is also intended to be considerate and consistent with the fiduciary duty of trustees to act in the best interests of members.
We are happy to help trustees understand their legal ESG obligations. Please contact Kate Granville Smith with any questions.