Funds risking pensions by ignoring climate change, MP warns

Funds risking pensions by ignoring climate change, MP warns

A minority of funds appear worryingly complacent about the risks of climate change to investments, MP Mary Creagh has warned.

Ms Creagh, who is also chairwoman of the Environmental Audit Committee, said although it is reassuring the majority of the UK’s largest pension funds are taking steps to manage the risks climate change poses to their investments, a minority of funds still appear to be ignoring the risks.

She made the comments today (Friday) as the Committee published responses it has received from the UK’s 25 largest pension funds detailing their funds’ approach to climate change risk and whether it is incorporated into their investment decision-making.

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She said: "It is encouraging that a majority of the UK’s largest pension funds say they are taking steps to manage the risks that climate change poses to UK pension investments.

"But a minority of funds appear worryingly complacent.

"Pension funds should at least assess the exposure of their assets to the physical, transition and liability risks from climate change that will materialise during savers’ lifetimes.”

The committee found that seven of the largest schemes have committed to report on the climate change risks and opportunities facing their funds in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

This includes the West Midlands Pension Fund, which has already reported in its 2017 Annual Report in line with the TCFD recommendations. Eight of the schemes say they are considering how to respond and ten say they have no current plans to report in line with TCFD.

Generally, the Committee found it received responses from three broad categories when it comes to engagement with climate change.

The first ‘more engaged’ group said that say they are taking steps to assess and minimise their exposure to the physical and transition risks from climate change. Pension funds in this group support recommendations on climate financial disclosures and most have committed to – or are considering – reporting in line with these recommendations. Only 11 funds fell into the group including BT Pension Scheme.

The second is the ‘engaged’ group, who are making some progress. They acknowledged climate change as a risk, but often view it as one of the many environmental, social and governance (ESG) factors they have to contend with. This group have some responsible investment policies in place. Eight funds fell into the category including British Airways Pensions.

Lastly, there is the ‘less engaged’ group who have not formally considered climate change as a strategic risk. For this group, climate change was spoken of as one of a number of environmental, social and governance (ESG) issues that investment managers are left to manage. Six funds fell into this category including Electricity Pensions Trustee Ltd.