October 7, 2019 / Analysis

Pensions recognise climate change role

By Joe McGrath, ESG Clarity

Trustees increasingly believe they must play a role in protecting the planet

Pensions recognise climate change role

A poll of major UK pension schemes has found that nearly three quarters of investors believe they should be influencing climate change measures through their investment choices.

The research, conducted among the 400 investors attending the 2019 XPS Pensions Group annual conference, found that 73% of schemes now believe they should positively seek to influence climate change through their investment actions.

Just 25% of those polled thought that climate change was a risk that they considered to be outside of their control.

The results are a marked change from years gone by when pension schemes had historically thought that investment decisions and environmental risks needed to be considered separately.

“The world is changing and so must the way we invest,” said Simeon Willis, chief investment officer at XPS Pensions Group.

“UK pension schemes underestimate the power they have to influence change by incorporating ESG and sustainability into their long-term strategy. Investments are no longer just about risk and reward, an additional ESG lens and measurable outcomes for wider society need to be a considered.”

Willis said that trustees need to evaluate their asset managers and “demand more” by standing up for what it is that their members want.

“This is an opportunity for change, not just a box ticking exercise,” he said.

The research carried out at the event also threw up several other interesting observations. Some 60% of UK pension schemes now consider their overall investment approach to be either responsible or sustainable while 40% said that they still have “traditional” investment approach.

“The pensions industry is operating in a turbulent economic environment of Brexit uncertainty, global trade wars and developing pressure on climate change,” explained Paul Cuff, chief executive officer of XPS Pensions Group.

“Pension schemes, with the vast assets under management, can be a great force for positive change. At the same time, at the level of the individual, there are big challenges around keeping members safe in the options and freedoms they choose.”