Pensions urged to up climate change activity

The trade group representing some 1,300 UK pension schemes, with £1 trillion of assets, has called on the industry to step up efforts of climate change.

Addressing members at the annual Pensions & Lifetime Savings Association Investment Conference, Richard Butcher, the group’s chair, said it was time for the sector to “go beyond minimum compliance” if schemes are to collectively address systemic risks facing investors.

“Last year was a remarkable year in a number of ways. One of
those was the sudden acceleration in the public’s perception of its
environmental responsibilities, thanks in large part to Greta Thunberg and
Extinction Rebellion,” Mr Butcher told delegates in Edinburgh.

“These are some of the people whose money we protect. They
are demanding we act. The minister, Guy Opperman, is demanding we act. The regulators
are demanding we act.”

Mr Butcher’s delivery was against a backdrop of falling
stock markets as a result of the coronavirus. Despite this, he warned that short-term
market behaviours must not become a distraction for schemes, who also need to
retain their focus on long-term risks.

The PLSA has already been heavily involved with investor initiatives relating to climate change, including the Climate Action 100+. The trade group said that votes were cast on behalf of UK assets totalling €2.84 trillion in 2018 at company annual general meetings, on sustainability grounds.

However, the PLSA’s chairperson said while members should be
recognised for being “at the forefront of climate-aware investing” there is
much more that they could do.

“We are not arguing for an increase in regulation, but we do
believe we have fiduciary and a social responsibility to go beyond minimum
compliance,” he said.

“That’s not to say we should ignore the restraints that
apply to us. This is a new area and we have lots of complex practical and legal
issues to resolve. To be clear, we shouldn’t confuse a recognition of those
complex issues with a reluctance in wanting to deal with them.”

The PLSA subsequently released a ‘five point plan’ which
support its “Investing for Good” initiative in 2020. These include details of
how pension scheme members should use data, where they can obtain guidance and
how best to drive transparency.

The project also includes plans to generate more “thought
leadership” where member schemes can articulate examples of best practice and
the need for an ongoing dialogue to ensure the industry remains abreast of
emerging challenges relating to climate change.