UK’s largest pension funds questioned over climate change risks

6th March 2018


Web ecofinance shutterstock 517257208

Related Topics

Related tags

  • Reporting ,
  • Finance ,
  • UK government

Author

Paula Collins

The UK’s 25 largest pension funds, representing £555bn of assets under management, were yesterday asked to explain to a select committee how they handle the risks that climate change pose to savings.

This came on the same day that the Department for Work and Pensions admitted there was widespread confusion among pension trustees regarding the scope of their fiduciary duties in relation to environmental risks.

There is a concern that many are not considering how climate change could impact investment returns, with a green finance inquiry launched last year to explore how to further integrate sustainability into financial decision-making.

“A young person auto-enrolled on a pension today may be 45 years away from retirement. Over that timescale, these climate change risks will inevitably grow,” Environmental Audit Committee chair, Mary Creagh, said.

"The climate change risks of tomorrow should be considered by pension funds today. We are examining whether pension funds are starting to take these risks into account in their financial decision-making.”

The committee heard how asset owners and pension fund trustees had demonstrated many examples of good practice, but that their duties are sometimes misinterpreted to mean simply maximising short-term returns.

It is thought that this leads to the neglect of longer-term considerations, including environmental sustainability and climate change-related risks and opportunities.

This comes after the Task Force on Climate-related Financial Disclosures (TCFD) recommended last year that organisations reveal how climate risks are managed and overseen by their boards.

It also suggested that they disclose how they identify, assess and manage the risks, reveal the metrics and targets used, and report on the actual and potential impact of climate change on their business.

Bank of England governor, Mark Carney said: “Markets need the right information to seize the opportunities and mitigate the risks that are being created by the transition to a low-carbon economy.

"Over the coming year, issuers will begin to deploy the TCFD framework and through collaboration and engagement with the providers of capital, will together start to release more efficient and decision-useful disclosures.”

Image credit: Shutterstock

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

How much is too much?

While there is no silver bullet for tackling climate change and social injustice, there is one controversial solution: the abolition of the super-rich. Chris Seekings explains more

4th April 2024

Read more

One of the world’s most influential management thinkers, Andrew Winston sees many reasons for hope as pessimism looms large in sustainability. Huw Morris reports

4th April 2024

Read more

Alex Veitch from the British Chambers of Commerce and IEMA’s Ben Goodwin discuss with Chris Seekings how to unlock the potential of UK businesses

4th April 2024

Read more

Regulatory gaps between the EU and UK are beginning to appear, warns Neil Howe in this edition’s environmental legislation round-up

4th April 2024

Read more

Five of the latest books on the environment and sustainability

3rd April 2024

Read more

Ben Goodwin reflects on policy, practice and advocacy over the past year

2nd April 2024

Read more

In 2020, IEMA and the Institute and Faculty of Actuaries (IFoA) jointly wrote and published A User Guide to Climate-Related Financial Disclosures. This has now been updated to include three key developments in the field.

2nd April 2024

Read more

Hello and welcome to another edition of Transform. I hope that you’ve had a good and productive few months so far.

28th March 2024

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close