UK pension schemes are making “meaningful progress” on both climate and nature-related goals — despite emerging political headwinds against net zero and ESG initiatives.
A new Pensions for Purpose report found 40 per cent of UK schemes now have dedicated climate allocations, and 60 per cent of asset owners view climate risk as a core part of their fiduciary responsibilities.
The report found that while 40 per cent of UK pension scheme respondents have dedicated climate allocations, others schemes are taking a whole-portfolio approach to environmental risks and opportunities across asset classes.
Interest in climate solutions in emerging economies is also growing with 87 per cent of asset owners investing in, or planning to expand into emerging economies for climate solutions.
This marks a clear shift from previous Pensions for Purpose research, where there was significant caution around the perceived risks of investing in emerging markets.
The report also found that many asset owners are beginning to integrate biodiversity considerations into their climate strategies, a clear sign that they are recognising the interconnection between climate and nature.
However, the research progress remains uneven, with gaps in data and investable scale continuing to limit broader adoption.
Energy transition infrastructure was identified as a top investment priority for the years ahead. Respondents highlighted a mismatch between the capital required and current commitments, particularly in private equity and infrastructure. Sectors such as transport,
utilities and industrials, especially those advancing solutions like green steel, biofuels and battery storage, continue to face underinvestment despite growing demand.
Meanwhile, political instability and growing politicisation of net-zero policy are seen as key risks. Policy stability is a key consideration for investors, whose strategies rely on predictable and stable policy frameworks.
The report, Climate innovation – investing in the net-zero economy, was commissioned by SAIL Investments, and is based on interviews with 20 UK pension schemes, consultants and advisers managing over £400bn in assets.
Pensions for Purpose research manager Bruna Bauer says: “Asset owners are embedding climate and nature across entire portfolios – public and private, developed and emerging markets.
“What’s equally striking and encouraging is how quickly this change
is accelerating. From stewardship in listed equities to nature-based infrastructure in emerging economies, the focus is no longer on box-ticking, it’s on systematic delivery of measurable results, reflecting widespread recognition that climate risk is an important
part of a pension scheme’s fiduciary duty.”
SAIL investments chief sustainability officer Michael Schlup adds:“This research opens up an essential conversation about how capital can be most effectively allocated – at global scale. To date, most climate investments have focused on mitigation.
“But reaching net zero will require going beyond mitigation. Much of that will need to come through nature-based solutions…where the interconnection between climate and nature can be addressed through hitherto scarcely addressed highly scalable investment opportunities.”