With the UN Climate Change Conference (COP26) heading to the UK in just a few weeks, you might have seen a lot about climate in the news or on social media. Ambitious actions are required to help reduce greenhouse gas emissions across the board in order to press the breaks on the global temperature rise. Without this, we will see further climate change and impacts which could make a catastrophic impact on our everyday lives.
With this in mind, The Pensions Regulator are advocating for Trustees and the pensions industry to help play their part in the mission to save the planet.
From 1 October 2021, large schemes with assets over £5 billion will have new reporting requirements intended to improve the quality of governance as they address climate related risks and opportunities. In 2022, they’ll be joined by schemes with assets under management of £1 billion. In a couple of years, 80% of schemes will be required to follow suit and participate in these requirements. Reporting requirements shouldn’t be the only reason why Trustees should start to look at improving policies on climate change, we all have a part to play in this challenge!
Trustees have the power to set policy on their investments, deciding how considerations such as climate change are measured in the selection of their funds. They also have the power to challenge investment managers and their other advisers to improve processes with regard to the shift to net zero. Their influence can help guide the industry into better practice and set the example for others across the country and around the world.
Research from Make My Money Matter said savers switching to a “greener” pension could do more to tackle climate change than driving an electric car or a vegan diet.
The Pensions Regulator encourages Trustees to sign up and follow the 2020 UK Stewardship Code. This will give them good oversight into the best practice on improving the governance of investments, as well as pushing for improvement in areas of risk such as climate change.