More than two-thirds of pension funds now have net zero commitments in place, according to the latest data fro the Pensions and Lifetimes Savings Association — a significant rise over the past 12 months.
Its research shows 68 per cent now have such pledges in place, up from 57 per cent in May 2022.
Despite this positive action most respondents (75 per cent) continue to be concerned about recent news updates, which suggest there is no sustainable pathway to limiting global temperature rises to 2˚C.
Furthermore, confidence in the UK meeting its climate targets has declined since November 2022. More than two-thirds (68 per cent) now believe that the UK will not meet its climate targets, compared to less than six in 10 (59 per cent) in November 2022.
The majority (80 per cent) believe the Prime Minister’s recent announcement to delay net zero target deliveries will have an impact on transition plans.
More than two thirds of schemes (67 per cent) now feel there are obstacles the UK Government could remove to assist pension funds in their work to address climate risk. This is significantly higher than the 53 per cent the wanted further government action a year ago. More now also feel the Government should be doing more to enable investors to do more on climate risk (69 per cent), up from over half in November 2022 (56 per cent).
When it comes to pension funds with net zero commitments the vast majority, nine out of 10, are targeting being net zero compliant by 2050. Among those, some aim to be compliant earlier, with one in seven (14 per cent) by 2035, and one in five (18 per cent) working towards being net zero between 2035-2040.
Of the 27 per cent of funds that don’t have a net zero commitment in place, one in 10 anticipate having one in pace within the next two years, but one in five (20 per cent) report that it will be more than two years before they can make a firm commitment on this issue.
Most continue to feel their fund has made significant progress in playing its part in the transition to a net zero society (64 per cent). The PLSA says this in line with finding in its previous 2022 report.
These results are published on the eve of COP28 and as pension professionals meet in London for the PLSA’s ESG Conference to explore the most recent developments in the quickly evolving responsible investment landscape and share best practice to deliver improved outcomes for savers.
Responsible investment and climate change has been a policy priority for the PLSA for a number of years. In October 2020 the PLSA published a list of recommendations which included resourcing joint-industry and government initiatives to clarify definitions, increase the quality and availability of necessary data, improve the supply of suitable climate-aware investment products.
In January 2021 the PLSA, along with the Association of British Insurers (ABI) and the Investment Association (IA) produced a Carbon Emissions Template to help pension schemes meet their obligations under the Climate Change Governance and Reporting Regulations.
According to the PLSA’s most recent survey, most pension funds now feel that the quality of ESG data provided by asset managers has improved (75 per cent), with most saying it has improved a little (63 per cent), with one in 10 saying it has improved significantly (12 per cent).
Around six in 10 feel that asset managers (57 per cent) and investment consultants (60 per cent) have responded well to the challenges of improving climate reporting.
PLSA deputy director of policy Joe Dabrowski says: “We’ve tracked our members’ preparedness for net zero over a couple of years now and are really pleased to see their progress as data quality has improved.
“The latest research indicates the window to limit global warming to 1.5˚C may be closing. This has grave consequences for society, pensions and savers. It’s crucial that the Government delivers on its green transition strategy and avoids creating any uncertainty with mixed messaging on its climate and sustainability objectives.”