Pension funds will be ordered to warn of the risks that climate change could have on members’ investments
- Pension funds will be required to report risks of climate change on investments
- Largest 100 schemes will have to publish climate risk disclosures by end of 2022
- Therese Coffey said the plans are a ‘significant step’ in tackling climate change
Pension funds will be required by law to report the risks that climate change could have on members’ investments.
Climate change is expected to have a significant impact on pension assets and returns both through the risks of a warmer planet and moves towards a lower carbon economy.
Work and Pensions Secretary Therese Coffey yesterday announced plans for the 100 largest schemes with assets of more than £5billion each to be required to publish climate risk disclosures by the end of 2022.
The 100 largest pension funds will be required by law to publish climate risk disclosures by the end of 2022, Work and Pensions Secretary Therese Coffey announced on Wednesday
Under the proposals, this requirement would be extended to around 250 schemes with assets of more than £1billion the following year.
Miss Coffey said it was ‘one of the most significant steps to date in the UK’s progress on tackling climate change’.
She said funds should look at ‘green and sustainable assets as the investments for the future’.
The Work and Pensions Secretary added: ‘We are at a climate change crossroads – we must begin to look at green and sustainable assets as the investments for the future of our planet and of our pensions.
‘Any scheme that has no plan for its transition is risking its future and the future of its members.
‘Schemes of all sizes need to be acting right now for the financial risks and opportunities that climate change presents, providing sustainable returns that will keep many pensioners comfortable in their retirements.’
Ms Coffey rejected claims from some environmentalists calling for the UK Government to go further and call for divestment from polluting industries such as fossil fuels.
She said: ‘We see this overly simplistic approach actually making it harder to achieve net zero.
The requirement would be extended to around 250 schemes with assets of more than £1billion in 2023. Miss Coffey said it was ‘one of the most significant steps’ in tackling climate change
‘Pension schemes do need to act in their members’ best interests, not to take moral stances on their members’ behalf.
‘While some high carbon firms will fail to make the transition to a low-carbon economy, this is an opportunity to make companies transform their business models to be sustainable.’
Ms Coffey made the announcement in Glasgow ahead of the COP26 climate conference, due to be held in the city next year after it was delayed due to the coronavirus pandemic.
She said: ‘As we look forward to hosting COP26 next year here in Glasgow, we can be proud that the UK is at the forefront of efforts to tackle the challenges posed by climate change.
‘The Government, particularly my fellow minister (work and pensions minister) Guy Opperman who has been working flat out on this agenda, we welcome the views of trustees and all other stakeholders on our proposals and ask that schemes play their part in meeting the challenges of climate change.
‘This is a journey that we must embark upon together and no pension scheme is too small to make a difference.’