The chief executive of Universities Superannuation Scheme Investment Management has called for “a significant shift” in both financial and non-financial incentives to encourage businesses and consumers to emit less carbon.

Simon Pilcher’s call came as USS published its annual report and Taskforce on Climate-related Financial Disclosures report last week, which show the £76.8bn scheme reduced its portfolio emission intensity by 51% since 2019, from 89.5 tCO2e to 44.2 tCO2e per £m invested. This is ahead of its interim target to reduce emissions intensity by 25% in 2025.

“We believe that a world with higher temperatures will deliver poor financial outcomes – but, as our TCFD report clearly evidences, what we’re achieving at a portfolio level is not being replicated at a global, real-world level,” Pilcher said.

“There needs to be a significant shift in incentives – both financial and non-financial – to encourage a move towards low-carbon behaviour among business and consumers so that it becomes the easy thing for people and companies to do.”

The scheme highlighted its “serious concern” about this lack of real-world change around carbon emissions, and its TCFD report shows it plans to focus on achieving "real-world climate outcomes that will benefit the scheme".

USS trustee chair Dame Kate Barker highlighted concerns that temperatures will increase by about three degrees, warning this will likely mean lower returns and a potentially worse funding position.

"The reality is that the outlook for real-world decarbonisation and achieving a rapid and orderly transition looks bleaker than when we published our first TCFD report in 2018," she said.

She added: "We will focus our efforts on engagement with governments and regulators, encouraging them to adopt policies that are conducive to real-world
decarbonisation. We will work with other investors that have long-term horizons in this endeavour."

The government is currently consulting on mandating transition plans for the financial sector and FTSE100 companies, as well as on draft UK Sustainability Reporting Standards and on developing an oversight regime for sustainability reporting assurance. While transition plans are seen as helpful, some argue that change requires carbon to be adequately priced, while others have said the buck stops with government when it comes to reducing emissions.
   

   

The election of Donald Trump to the White House in 2024 has led to a backlash against the integration of environmental, social and governance factors in the US, where many financial services companies are based or have significant business. Several large US asset managers firms have pulled out of net zero initiatives. 

Despite this, consultancy Isio recently argued that “overall levels of ESG integration remain robust at firm level”. 

 

More asset managers have committed to the UK Stewardship Code compared with last year (69% in 2025, up from 65% in 2024) and net zero plans (65% in 2025, from 58% in 2024), according to the consultancy.

 

“It’s encouraging to see that progress on sustainable investing continues, even in the face of a wider ESG backlash, particularly in the US,” said Cadi Thomas, head of sustainable investment. 

  

Thomas added, however, that “there’s still significant work to do at fund level”, with disclosures remaining inconsistent, particularly in private markets, and with social and nature-related data continuing to lag.  

 

“Fewer funds are adopting formal ESG objectives, potentially driven by increasing labelling scrutiny. This shift suggests a more cautious approach, likely in response to growing regulatory pressure,” she also pointed out. “With sustainability reporting now firmly on the government’s agenda, now is the time to take stock and ensure strategies can stand up to increasing scrutiny.”