UK pensions industry urged to plug £60bn low-carbon funding gap

James Richardson, director of analysis and chief economist of the Climate Change Committee, told delegates at the Pensions and Lifetime Savings Association’s ESG conference in London that pension funds and asset managers had an “important role” to play in bringing down CO2 levels.

Richardson explained that in all but the last 150 years of 800,000 years of CO2 data, levels had been between 100 and 200 parts per million (ppm), but had then risen from 250 ppm to 400 ppm between 1850 and the current day.

This had been accompanied by a two degree (centigrade) rise in global temperatures in the past 150 years.

The good news is that we know how to do this.James Richardson

Richardson explained that, using a 1990 baseline, the UK had managed to halve emissions of greenhouse gases and had met the first three carbon budgets (CB)  the CCM had set.

Further budgets to be set including CB4, CB5 in 2030 and CB6 in 2035, by which the target would be net zero.

Richardson said the UK was behind on what is needed to get to six. “If we are to stay on track we have to quadruple the pace on all those other sectors, industry, buildings and waste, and that is our challenge” 

“We have to keep pushing gas out of the power sector, but we also need to keep going with transport, industry and waste.”

“The good news is that we know how to do this. Fossil fuels are inefficient technology, heat pumps and electric vehicles are more efficient than their alternatives.”

He added many of the technologies that could get the UK to net zero existed, while many which could make it easier were in development or did not yet exist.

“Not that it is easy; it is a very, very big job,” said Richardson.

As a result, tension funds and asset managers were urged to look at how they could invest more in helping the transition.

“It’s very capital intensive and is a huge investment-led transition. We are substituting resources - things dug out of the ground - with alternatives like wind turbines. [There is a need for] £60bn of additional investment in low carbon activities needed", Richard said.

He said he welcomed progress on large projects, including government deals with Tata Steel and British Steel and changes to planning to allow more electricity transmission.

“There is still a lot to be done and 2030 is not very far away.

Climate change is with us, many of those changes will get worse so we as a country have to adapt.”

An ESG survey carried out among PLSA members, found that the cost of living crisis had impacted members' adoption of ESG practices.

Eight in 10 members saw climate translation as a priority, compared to 50 per cent who saw human rights as important.

A third of members also said they were not familiar with the Taskforce on Nature-related Financial Disclosures (TNFD), although five are very up in the ball on it.

The quality of TNFD was mixed, although 75 per cent of members said the data had improved. 

Emma Douglas, chair of the PLSA, said two thirds of the people surveyed had a net zero target of being compliant by 2050, while a quarter said they had no commitment in place.

Samantha Downes is a freelance journalist