Asset managers working in private markets are failing to provide their clients with the information they need to effectively manage climate risks, pension consultants warn.
Research by Hymans Robertson warns that this lack of data has significant implications for both DB and DC pensions schemes’ ability to meet their governance and reporting obligations under TCFD.
The research aimed to assess the level of climate data asset managers could provide on their funds across four asset classes: private debt, private equity, real estate and infrastructure.
It found what the consultants described as “a worryingly low level of engagement” from some asset managers with just over two-fifths (42 per cent) of managers providing data on all funds and a further 14 per cent of managers providing data on some of their funds.
However, nearly half of managers (44 per cent) approached did not respond, raising concerns as to whether managers are prepared to meet expected requests for climate information.
Also highlighted by the research, was the significant variation in the depth of information disclosed by respondents, with the reporting of carbon emissions data not yet commonplace.
Managers of property and infrastructure funds are better prepared with just under half – (44 per cent) for property and 48 per cent for infrastructure – providing data on carbon emissions. In contrast, private equity and private debt managers were able to report significantly less information on climate issues, with none of the private debt managers included with this survey providing carbon emissions data.
Hymans Robertson head of responsible investment Simon Jones says: “Our research lays bare just how important stewardship is when it comes to managing obligations around climate risk.
“The need for asset owners to assess climate risks and report on carbon emissions has been well signposted which has, in turn, created an expectation that asset managers will be able to provide this data. Ensuring that requirements are clearly communicated, and expectations set, is therefore critical.
“The need for data will not diminish and it is incumbent on asset managers to continue to work with underlying investee entities to improve data availability. Where data may be challenging or uneconomic to collect, transparency is vital to provide confidence that climate risks are being properly managed. Efforts are needed to improve data provision.
“We know there will not be a short quick fix, but all organisations need to recognise the importance of this issue. We expect that asset owners will increasingly seek to differentiate managers on how they address climate risks and the use of minimum standards for climate reporting is likely to be a consideration for our clients. Being able to show year-on-year improvements in both data quality, and the outcomes that are being represented, will build confidence that climate change is being properly addressed.”
