A new report by Pensions for Purpose and Impact Frontiers has found many UK pension funds are underusing impact reports. A new Community Interest Group (CIG) aimed at improving impact literacy is set to launch in August.
New research by Pensions for Purpose and Impact Frontiers reveals that while most UK pension funds receive impact reports, few read them thoroughly or use them to guide investment decisions.
The new report ‘Impact Integration: advancing reporting & management practices in pension funds’, drawn from interviews with 19 pension funds, asset managers, advisers and consultants, found many institutional investors remain unsure about how to use impact data meaningfully.
According to the report, most pension funds don’t fully engage with these reports or use them to inform investment decisions. This is often due to low confidence, limited impact literacy, and uncertainty about what constitutes useful data.
The report also found that trustees often struggle to assess report quality or relevance, while asset managers face challenges in collating quality data, sometimes opting for polished narratives over substance. This then can result in reports becoming marketing tools rather than decision making aids, thereby increasing greenwashing risks.
To address these issues, the report recommends adopting frameworks such as the Impact Performance Reporting Norms and the Operating Principles for Impact Management to improve the credibility and usability of reports.
Furthermore, a new Community Interest Group (CIG) will launch in August to improve impact literacy across the sector. The new initiative also aims to align fiduciary duty with long-term goals, including net-zero.
Asset owners backing the initiative include PGGM, Smart Pension, South Yorkshire Pensions Authority, Tyne and Wear Pension Fund and Wiltshire Pension Fund.
Speaking to Impact Investor on how pension funds can use impact reports to drive investment decisions, Bruna Bauer, research manager for Pensions for Purpose said: “The first step is simply to read the impact reports already being received and assess their relevance.
“To move beyond box-ticking, funds must build stronger internal understanding of impact, especially among trustees, and use reporting as a basis for questions, feedback and accountability,” Bauer said.
Fiduciary duty
The report comes as Pensions for Purpose, alongside ShareAction, have been advocating for systemic risks, such as climate change, to be recognised as financially material and appropriately reflected in fiduciary duty. To meet goals like net-zero, there needs to be a broader systemic change in regulation and fiduciary duty frameworks, according to Bauer.
“Our report also points to deeper, systemic challenges: ambiguity around fiduciary duty, low levels of trustee confidence and the difficulty of weighing impact alongside risk and return. Our policy work with ShareAction highlights the need for broader reform to ensure systemic risks like climate change are recognised as financially material,” Bauer added.
Asset managers can improve reports by balancing standardisation with flexibility, using shared metrics where possible, but allowing space for investment-specific nuance. To do this, they must go beyond selective case studies and provide a balanced view, including trade-offs and unintended outcomes, Bauer said.
“Reports should be concise, materially relevant, and link impact to financial performance, especially for funds with goals like net zero. Above all, managers should focus on producing reports that help asset owners make informed decisions, not just marketing materials with another name,” Bauer added.
