Most pension funds feel the government should do more to help investors go further to address climate risk and are not confident the UK will hit its 2050 net zero target. 

 

A survey conducted by the Pensions and Lifetime Savings Association found 59% of pension funds that responded are not confident the UK will meet its climate target.  

 

The survey results are being published in light of the latest Intergovernmental Panel on Climate Change report, which said humanity is likely to overshoot targets to limit the global temperature increase to 1.5 degrees. Nearly three-quarters (74%) of pension funds said they are concerned about this. 

 

More than half (56%) also feel the UK government should be doing more to help investors go further to address climate risk. A similar proportion (53%) said the government could do more to remove obstacles to assist pension funds. 

 

“Government has an important role to play in helping pension funds achieve their net zero targets, by actions such as adopting a clear strategy on sustainable energy security and helping set and define meaningful standards for [environmental, social and governance] measurement and reporting. We ask government to prioritise these actions,” said Nigel Peaple, director policy and advocacy. 

 

“The IPCC’s 'final warning' highlights the severity of not taking action to address the environmental crisis humanity faces.” 

 

Respondents to the PLSA’s survey cited having a coherent strategy on sustainable energy security and contributing to international bodies to define and standardise ESG measurement and reporting standards as some of the steps the government could take.  

 

The PLSA said pension schemes are calling on the government to continue with its Green Finance Strategy, progress and finalise the UK green taxonomy, ensure climate reporting is embedded across the investment chain including employers, and accelerate efforts to make the City of London the world’s first net zero financial centre.  

 

Six in 10 schemes have set a target for achieving net zero emissions, the survey shows, and 70% said their scheme has made significant progress in playing its part in the transition to a net zero society; this proportion rises to 100% among Local Government Pension Scheme funds. 

 

However, 12% said their focus on ESG has been reduced because of recent economic trends, such as the cost-of-living crisis and market volatility. 

 

Schemes that did not yet have a net zero commitment in place said this was largely to do with the difficulties of comparing like-for-like data received from investee companies and wanting to ensure their commitment is robust. 

 

In January, the second iteration of the Carbon Emissions Template was published by the PLSA in partnership with the Association of British Insurers and the Investment Association. It gives schemes a standardised set of data with which to calculate their emissions. 

 

What else could the government do to support pension funds in addressing climate risk?