Pension trustees are taking action to address climate risks and explore green opportunities, according to a review of their climate reports by The Pensions Regulator (TPR).
Pension schemes with more than £1 billion in assets under management and authorised schemes have been required to publish climate reports since 2022.
A TPR review of the relatively new requirements found many examples of good strategic decision-making and that more than 60 percent of reports that it examined had some form of net zero goal with a target date of 2050 or earlier. There is currently no requirement for trustees to set a net zero target, but the regulator said these targets can be consistent with sensible risk management.
Examples of trustee action on climate risk included updating defined contribution default lifestyle strategies to include sustainable funds, increasing allocation to low carbon tracker funds or companies with ‘high levels of green revenue’, looking at green opportunities such as forestry, green bonds or committing funds to private market renewables, and encouraging fund managers to engage with top carbon dioxide emitters.
Mark Hill, TPR climate and sustainability lead, said: “Climate change disclosures should be the product of good risk management.
“That’s why we want schemes to know what ‘good’ looks like and improve their management of climate-related risks and opportunities.
“Even if not yet in scope for disclosures, schemes should act now and read this report to help them in their strategic decision-making.”
