PLSA: ‘Go beyond minimum compliance’ on climate change

The PLSA urges pensions industry to go further than simply complying with legislation on climate change

The chairman of the Pensions and Lifetime Savings Association (PLSA) Richard Butcher has called on the pensions industry to go further than simply complying with legislation on climate change as ignoring the risks would be “dereliction of our duty”

Speaking at the PLSA Investment Conference in Edinburgh this morning (6 March), Butcher urged trustees to “go beyond minimum compliance” in their efforts to tackle climate change, highlighting five keys ways the body is assisting workplace pension schemes in this area.

Explaining the urgency, Butcher said: “Climate risk is a systemic risk which affects every sector, every business model and, at its extremes, every company.

“That means, as investors or advisors to investors of over a trillion pounds, it affects us, the members of the PLSA. We simply cannot ignore it. Indeed, in my view, if we were to it would be a dereliction of our duty.”
The five ways the PLSA is supporting workplace pension schemes in fighting climate change are:

  • Data – The PLSA will compile key facts and statistics related to pension funds and climate change investing to ensure a “well informed and effective public debate”, said Butcher.
  • Guidance – Providing members with guidance that keeps them “informed, up to date and ready to act”, especially when it comes to regulatory change. Butcher explained: “Climate risk is a major part of our 2020 Stewardship and Voting Guidelines – published in February – which calls for companies to behave responsibly, and for pension funds to hold company directors and their own asset managers accountable when they don’t. This year we’ll also produce guidance on implementing the Shareholder Rights Directive II, which aligns with our aims of increasing transparency and accountability, and encouraging long-term thinking from investors.”
  • Standards and rules – The body will also continue its work with the government, regulators, other industry bodies and financial services companies “to improve the transparency and quality of climate change-related investment information”, which will assist trustees in understanding their risks and so make informed decisions.
  • Thought leadership – Butcher said the PLSA will ask leading figures in the industry to help drive change by contributing thought leadership pieces. This will include portfolio reports on climate change, and pieces on ESG and stewardship challenges ahead and how trustees can combat them.
  • Speaking to schemes – Finally, the chairman said it has become “increasingly clear to us that the highly intermediated investment chain is currently not working effectively in supporting schemes to live up to their new duties on climate change”. Butcher called on local groups, fund CEOs, CIOs, members and anybody else to discuss with the PLSA their feedback and recommendations for action, ready in time for the annual conference in October.

In his speech, Butcher added that the PLSA and its members have been at the forefront of progressive climate risk policy for many years, including being a part of Climate Action 100+, engaging with investee companies on sustainability grounds and even sacking investment managers that do not take action on the climate crisis.

Additionally, climate risk regulation is heating up with new ESG rules being imposed on personal pension providers.

“Although these rules are a start, they are not, in our view, enough,” he said.

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

The PLSA represents over 1,300 pension schemes with 20 million members.

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...