FTSE 100 pension schemes remain 'highly exposed' to climate risks

The UK's 100 largest listed companies are leaving their workers' pension savings highly exposed to climate risks, research by the ShareAction charity has revealed.

After studying 15 pension schemes covering around a million workers, and with £17.5bn in assets, it found that just two had adopted low-carbon investment strategies.

ShareAction said it had identified a disconnect between what the FTSE 100 has committed to do on climate change, and the protection it gives to its employees' savings.

Of the 15 companies studied, 13 are backing initiatives to address climate risks such as the Science-based Targets Initiative and the Taskforce on Climate-related Financial Disclosures.

“It's no secret that companies taking credible action on climate and sustainability issues are doing a better job of hiring and retaining talent, ShareAction research officer, Paul Britton, said.

“That these employees' pensions are exposed to unmanaged climate risks is wrong and will send alarm bells ringing – these schemes will pay pensions deep into the 21st century.“

The study highlights how a school leaver today could expect to retire in the 2060's, but that the impact of climate change on savings depends on the actions of pension schemes over the next decade.

The HSBC Bank Pension Scheme and RBS Retirement Savings Plan were the two schemes identified that had changed their default investment strategies to reduce the carbon exposure of staff pensions.

The UK Shell Pension Plan and BAE Systems DC Retirement Plan where among those to not even respond to the researchers, which warned that they are leaving their employees in the dark on climate risks.

It was also found that eight of 10 employer-sponsored trusts had discussed climate-related risks with their investment consultants, but that only three had gone on to conduct climate stress testing of their investments.

Environmental Audit Committee chair, Mary Creagh, said: “We need to fix the incentives that encourage short-term thinking – long-term sustainability must be factored into financial decision-making.

“Pension funds have a duty to act in the best interest of their beneficiaries and take account of long and short-term climate risks. But this report shows too many are lagging behind and failing to take these risks seriously.“

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