A group of NGOs and investor bodies including ShareAction, Pensions for Purpose, Make My Money Matter and Carbon Tracker has written to HM Treasury to expedite the regulation of investment consultants. Citing pension schemes’ heavy reliance on investment consultants to advise on matters such as fiduciary duty and climate change, the letter highlighted that the advice provided by consultants remains largely unsupervised. “The unregulated activities of investment consultants can […] significantly influence the decisions taken by UK pension schemes,” the letter read. “The line between regulated and unregulated activities is blurred, [even] when investment consultants state that they are not providing advice, the asset owner will often still rely on this and make investment decisions accordingly, even when such information or advice lies outside of the Financial Conduct Authority’s regulated perimeter.” The signatories pointed to issues with consultants’ use of economic scenario models that significantly underestimate both the scale of future climate-related damages and associated near-term risks, largely due to a failure to include tipping points. Other concerns relate to the overall structure and competitive dynamic of the investment consultancy market – including potential conflicts of interest and misaligned incentives.
