Fiduciary Duty in the 21st Century’s recommendations, the Ireland Roadmap

As a step towards implementing Fiduciary duty in the 21st century’s recommendations, the Ireland roadmap sets out recommendations in four categories: regulation, capacity building, stewardship and intermediation and corporate reporting.

Regulation

The Pensions Authority should ensure that the Environment Social Governance (ESG)-related provisions of  Institutions for Occupational Retirement Provision Directive (IORP) II are effectively implemented. In this context, we suggest that the Pensions Authority should:

• Issue guidance for pension funds and trustees as to how to ensure they are in compliance with the relevant provisions; and
• Set up a process for reviewing compliance and report annually on progress, lessons learned and the actions taken by the Pensions Authority where non-compliance is identified.

As a key element of its wider programme of work, the Pensions Authority should continue to raise standards of Irish pension fund governance and risk management, including asset allocation. ESG considerations should be an integral part of these efforts.

Capacity building

There is a need to raise awareness and build capacity across certain sectors of the Irish investment chain with regard to responsible investment. Specifically:

• Pension fund trustees, asset managers and service providers should have knowledge of ESG issues and responsible investment, and should participate in formal training;
• Responsible investment and ESG issues should be standard parts of trustee board agendas;
• Other investors (e.g. high-net-worth individuals and retail investors) should be provided with information on ESG issues and responsible investment, and should be encouraged to develop their knowledge on these issues;
• Case studies and examples of ESG issues and responsible investment best practices that are relevant to the Irish context should be developed and proactively communicated to the investment market; and
• The investment case for ESG issues and responsible investment, including that focusing on ESG issues as an integral part of investors’ fiduciary duties, should be made to the Irish market in a balanced and objective way.

To ensure that a co-ordinated approach is taken and there is not significant duplication of effort, it is suggested that Sustainable & Responsible Investment Forum (SIF) Ireland should convene a roundtable in the second half of 2018 with interested domestic institutes and bodies to discuss how best to approach this capacity-building issue.

Stewardship and intermediation

The Pensions Authority should, as part of its guidance on IORP II, encourage asset owners to make formal commitments to active ownership in their investment strategy6. This should include a commitment to include stewardship expectations in the selection, appointment and monitoring of asset managers.

Corporate reporting

To make informed voting and investment decisions and to direct meaningful engagement activities, investors require timely, decision-useful information on a firm’s operating performance and financial prospects, including ESG factors. Recognising the increasing levels of EU legislation and guidance relating to ESG disclosures, we recommend that the following principles shape the Department of Business, Enterprise and Innovation’s requirements for corporate disclosures:

• ESG factors should be disclosed within the annual report, with clear links between ESG factors and the company’s business model and risk factors;
• ESG factors should, over time, be subject to the same levels of assurance as financial data;
• Companies should report using common performance metrics to allow for comparability; and
• Companies should also disclose additional company specific ESG risks and opportunities.

Finally, the Department of Business, Enterprise and Innovation should continue to promote and enhance the adoption of forward-looking and scenario-based frameworks on climate change with companies, including the recommendations set out by the TCFD.

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  Fiduciary duty in the 21st century: Ireland roadmap

  June 2018