A recent report on UK natural capital investing highlights a shift in UK sustainability and fiduciary duty frameworks: principle-based standards are moving to the sidelines, while project and company-level key performance indicators (KPIs) are taking centre stage. These frameworks helped move the industry from patchy data towards standardisation, but more prescriptive approaches began to resemble investment mandation. Did UK asset owners reverse course on climate as a result—and what challenges may now resurface? The answer may lie in 2019. 

 

 

Investment mandation is the most prescriptive approach to sustainability regulation. While the UK government flirted with it over the past couple of years, the House of Lords ultimately voted to strip the new Pension Schemes Bill of ministers’ defined contribution (DC) investment mandation power, warning the clause was broad, exposed savers to political cycles and was hard to challenge, as the bar of proving ‘material detriment’ to members was impractically high.

 

Press reports indicate that ministers plan to bring the reserve power back when the Bill returns to the Commons, but in a narrower form designed to tie it more closely to the Mansion House Accord. Ministers are expected to cap mandation powers to increasing DC private market exposure to 10% of total assets, with at least half of that invested in the UK. 

 

 

In March 2026, the government added a new Pension Schemes Bill clause intended to clarify the meaning of ‘financially material considerations’, including environmental, social and governance (ESG) considerations, versus the ‘best interests of members’. Trustees and managers would be required to ‘have regard’ to the guidance once in force, but ministers and supporters insist the intent was to clarify, not control: guidance cannot override the law, and trustees could depart from it if they explain their reasoning. 

 

However, a subsequent Lords vote defeated the government’s amendment that would have required the Secretary of State to issue that statutory guidance—after some Conservative and Liberal Democrat peers argued it could become ‘mandation by the backdoor’ by letting ministers influence definitions like members’ ‘best interests’ over time.

 

 

In the absence of regulatory mandation and guidance, principles-based frameworks and standards are the only other approach before we turn the clock back to fully voluntary integration of sustainability considerations. However, stewardship standards have recently undergone dilution. For example, the UK Stewardship Code 2026 refocuses the definition on long‑term sustainable value creation and removes explicit reference to wider economic, environmental and social benefits, alongside lighter-touch reporting. Additionally, the Net Zero Asset Managers initiative re-launched after a year-long hiatus, but, crucially, without any explicit 2050 targets.

 

While reporting could certainly benefit from some streamlining, the softening of key standards and frameworks is rolling the sustainability regulation cycle back to 2019 when each investor had their own sustainability approach. At that time, over two-thirds of UK asset owners struggled with the lack of data and transparency when making ESG decisions, and this made it hard to assess and manage sustainability risks and impact. Additionally, nearly half complained about a lack of clarity and cohesion in ESG standards and frameworks. 

 

 

The subsequent five years saw the broad adoption of Task Force on Climate-related Financial Disclosures (TCFD), its expansion into the Taskforce on Nature-related Financial Disclosures (TNFD) and the adoption of climate targets validated by the Science-Based Targets Initiative (SBTi). During that time, the United Nations Principles for Responsible Investing (UN PRI) and UK Stewardship Code became the golden standard for climate-conscious asset owners.

 

However, the latest research shows these standards and frameworks as less useful in natural capital investing—and the lack of interest in the newly launched UK Sustainability Disclosure Requirements (SDR) labels suggests that principles-based frameworks and standards have turned into more of a regulatory burden than decision-useful metrics. Yet, undoing them completely may resurface the issue of standardisation and data comparability the industry experienced in 2019. 

 

 

Despite already investing in sustainable opportunities, alignment with fiduciary duty to pension fund members remains among the top three barriers to investing in sustainable assets such as natural capital—an asset class that is well aligned with the climate agenda. 

 

But looking at productive assets with greater exposure to non-financial outcomes, such as social infrastructure, nearly half of UK asset owners say there is a clash with their fiduciary duty to members which is blocking greater allocations.

 

UK pension trustees have been asking for the greater clarification of fiduciary duty for years. In fact, two years ago they suggested that a recent report by the Financial Markets Law Committee on fiduciary duty be turned into guidance by the Pensions Regulator (TPR). This has not yet happened. 

 

In March 2026, the Department for Work and Pensions announced a 14-member Technical Working Group tasked to produce ‘practical, principles-based’ content aimed at giving trustees ‘clarity and confidence’ on investment duties. The group includes legal, trustee and responsible-investment voices, including representation from ShareAction, the Association of Pension Lawyers, Nest and Pensions UK. This points to guidance that focuses less on abstract permission to consider ESG, and more on how to evidence materiality, time horizon, process, and documentation—i.e., making ESG arguments ‘fiduciary-proof’ rather than purely values-led. However, its results are yet to be seen. 

 

The Pension Schemes Bill has turned fiduciary duty into the subject of live political debate: not just a legal concept, but a contested boundary between trustee judgement and the state’s economic agenda. Principles-based standards and frameworks, as well as regulatory guidance can provide a comfortable buffer between the two, but recent developments risk turning the clock back to voluntary integration and a lack of transparency. Where do you want to be with 2050 targets—and is the UK heading back to fragmented sustainability approaches, or towards clearer investment frameworks?