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Covenant Quarterly Q1 2024

Sustainability Principles Charter

Accounting for Sustainability (A4S), The Church of England Pensions Board and Railpen have brought together pension funds, insurers, pension advisers (including Cardano as one of the signatories) and the regulatory community to produce a Sustainability Principles Charter (the “Charter”) for the bulk annuity process.

The Charter seeks to align expectations around sustainability within the bulk annuity process. It sets out clear principles to drive greater transparency, reporting and engagement before, during and after a buyout or buy-in transaction between pension funds and insurers.

In 2023, approximately £50 billion of pension scheme assets and liabilities shifted to insurers, with a further increase anticipated in 2024. The UK pensions sector is increasingly reliant on a few regulated insurers managing historic inflows. Simultaneously, both insurers and schemes are integrating sustainability into their operations and investments. Therefore, before engaging with insurers, trustees need clarity on two crucial aspects:

1) How does the insurer’s sustainability approach compare to the trustees’ efforts?

2) Does the insurer’s sustainability stance (including how they are planning for the future) expose them to more risk than peers?

Read the full Covenant Quarterly Q1 2024