New research, by law firm Pinsent Masons found 74 per cent of UK corporate pension schemes recognise the potential impact climate change could have on future investments. However, just 5 per cent of these schemes had specific policies in place to deal with this problem.
This research found that none of the UK’s largest corporate pension funds had targets for investment in low carbon, energy efficient or other sustainable assets. Similarly not one had a decarbonisation target.
It also found that only 12 per cent of fund had a metric for measuring the sustainability of their investments.
This research surveyed 43 of the UK’s largest corporate pension funds, with a total of £479bn assets under management. These included the Universities Superannuation Scheme, the Strathclyde Pension Fund and the BBC Pension Fund.
Pinsent Masons says that while many funds do not currently have specific climate change policies in place, several are creating metrics to measure climate change related indicators.
This shift has been accelerated by new regulations will require trustees to have greater transparency about their approach to climate change and ESG factors in investment strategies. These new Department of Work & Pension rules are due to take effect in October 2019.
Pinsent Masons says some funds are actively monitoring the environmental impact of their investment decisions. This includes the introduction of audits on the carbon-footprint and emission data of listed equity. This should give a clearer picture of a scheme’s carbon exposure.
Similarly there have been commitments to ensure certain pension schemes are ‘underweight’ in carbon investments.
Pinsent Masons head of pensions and long-term savings Carolyn Saunders says: “’It has been apparent for some time that climate change issues can affect financial returns. However, in the absence of a standardised approach to climate risk management in investments, most trustees are unsure how best to deal with the issue.
“Clarity about trustee duties with regard to climate change is a priority. The new regulations will make it clear that sustainability is a relevant consideration for all trustees.
“Trustees now need to decide how best they can discharge their duties in this area. For those who have not yet engaged with this area, the starting point is to assess the extent, if at all, to which their investment consultants and/or asset managers are currently taking account of ESG factors”.
