Policy Threads

30 Sep 2021 | Committee report linked

COP26, which will take place in Glasgow in November, may well be the largest summit ever hosted in the UK and it provides a major opportunity for the UK to show global leadership. We recommend that the UK Government should use this opportunity to make every endeavour to build an international consensus on the role of pension schemes and other parts of the finance sector in achieving the goals of the Paris Agreement.

COP26, which will take place in Glasgow in November, may well be the largest summit ever hosted in the UK and it provides a major opportunity for the UK to show global leadership. We recommend that the UK Government should …

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30 Sep 2021 | Committee report linked

Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and the associated costs of meeting different reporting requirements. It would also improve the comparability of different assets across international borders. COP26 provides a significant opportunity for the Government to secure international commitments to work towards the global harmonisation of climate-related disclosures. However, work towards global harmonisation of climat...

Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and the associated costs of meeting different reporting requirements. It would also improve the comparability of different assets across international borders. COP26 provides a signifi

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30 Sep 2021 | Committee report linked

A green taxonomy will be vital to the success of measures introduced by the Government to tackle climate change. It will support pension schemes, especially smaller schemes, in assessing the merits of different investments and avoiding the risk of “greenwashing”. We recommend that as far as possible the taxonomy should align with international standards, whilst also reflecting the UK context. (Paragraph 28) 32 Pension stewardship and COP26

A green taxonomy will be vital to the success of measures introduced by the Government to tackle climate change. It will support pension schemes, especially smaller schemes, in assessing the merits of different investments and avoiding the risk of “greenwashing”. …

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30 Sep 2021 | Committee report linked

We have not considered wider environmental, social and governance factors in detail during our inquiry. The Department for Work and Pensions’ consultation on social risks and opportunities by occupational pension schemes closed recently and it is important that these factors are considered holistically. We expect to look closely at the Government’s response to that consultation. We urge the Government to publish its consultation response within three months. In the response, it should outline...

We have not considered wider environmental, social and governance factors in detail during our inquiry. The Department for Work and Pensions’ consultation on social risks and opportunities by occupational pension schemes closed recently and it is important that these factors …

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30 Sep 2021 | Committee report linked

Making green investments, particularly in infrastructure, can be complex and costly. Larger schemes are usually better placed to meet those costs and to provide the high level of scheme governance required. We welcome the intent of the Department for Work and Pensions and the Pensions Regulator in encouraging scheme consolidation. We recommend that the Pensions Regulator report annually on the progress made to consolidate schemes within its existing research and analysis publications.

Making green investments, particularly in infrastructure, can be complex and costly. Larger schemes are usually better placed to meet those costs and to provide the high level of scheme governance required. We welcome the intent of the Department for Work …

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30 Sep 2021 | Committee report linked

The idea of “net zero alignment” does not have a single clear definition. Without a standardised definition, there is a risk that different pension schemes will interpret “net zero” in different ways. That will make it more difficult for savers to understand the approach their scheme is taking or to compare schemes. We recommend that the Pensions Regulator define net zero alignment.

The idea of “net zero alignment” does not have a single clear definition. Without a standardised definition, there is a risk that different pension schemes will interpret “net zero” in different ways. That will make it more difficult for savers …

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30 Sep 2021 | Committee report linked

Many schemes have already set net zero targets voluntarily. We encourage other schemes to consider whether they should also set net zero targets. While we recognise that any target must not undermine trustees’ fiduciary duties, we believe that in many cases these will be aligned.

Many schemes have already set net zero targets voluntarily. We encourage other schemes to consider whether they should also set net zero targets. While we recognise that any target must not undermine trustees’ fiduciary duties, we believe that in many …

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30 Sep 2021 | Committee report linked

While larger schemes are setting net zero targets, it is likely that many smaller schemes will not have the resources to do this effectively without support and guidance. Ambiguity about whether net zero targets would put trustees at risk of breaching their fiduciary duty to act in the best interests of their members is also a barrier for trustees. We do not believe that the fiduciary duty itself needs to change, but schemes do need more clarity. We recommend that the Pensions Regulator shoul...

While larger schemes are setting net zero targets, it is likely that many smaller schemes will not have the resources to do this effectively without support and guidance. Ambiguity about whether net zero targets would put trustees at risk of …

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30 Sep 2021 | Committee report linked

Defined contribution schemes used for automatic enrolment are required to have a default option into which the member is enrolled, unless they specify an alternative. We recommend that the Government consult on the case for mandating that these default options should align to UK Government climate goals.

Defined contribution schemes used for automatic enrolment are required to have a default option into which the member is enrolled, unless they specify an alternative. We recommend that the Government consult on the case for mandating that these default options …

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30 Sep 2021 | Committee report linked

As a large scheme the Local Government Pension Scheme (LGPS) could be well placed to demonstrate and develop best practice in pension scheme governance, including on climate change. The Minister for Pensions and Financial Inclusion told us that, in his view, the Local Government Pension Scheme should be run by the Department for Work and Pensions rather than the Ministry for Housing Communities and Local Government. This is an interesting view. We are not Pension stewardship and COP26 33 conv...

As a large scheme the Local Government Pension Scheme (LGPS) could be well placed to demonstrate and develop best practice in pension scheme governance, including on climate change. The Minister for Pensions and Financial Inclusion told us that, in his …

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30 Sep 2021 | Committee report linked

Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change.

Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change. …

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30 Sep 2021 | Committee report linked

Pension schemes make long-term investment decisions for their members. A clear UK—and, where possible, international—climate change strategy will provide greater certainty for pension schemes to make long-term investments. We recommend that the Government set out a UK climate roadmap—including sector specific pathways for meeting the Paris Agreement goals—to provide greater certainty for pension schemes and other investors, particularly for those investing in in long- term investments such as...

Pension schemes make long-term investment decisions for their members. A clear UK—and, where possible, international—climate change strategy will provide greater certainty for pension schemes to make long-term investments. We recommend that the Government set out a UK climate roadmap—including secto

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30 Sep 2021 | Committee report linked

The purpose of pension schemes setting net zero targets is not solely that the schemes themselves should be net zero aligned, but that they should make an impact in reducing the real economy’s contribution to climate change. Good stewardship is a method of achieving that change. Last year the Department for Work and Pensions set up the Taskforce on Pension Scheme Voting Implementation to make recommendations to drive better voting policies and vote reporting. We will be looking closely at its...

The purpose of pension schemes setting net zero targets is not solely that the schemes themselves should be net zero aligned, but that they should make an impact in reducing the real economy’s contribution to climate change. Good stewardship is …

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30 Sep 2021 | Committee report linked

Divestment is the process of selling assets already held by a pension scheme. Divestment remains a fallback strategy for pension schemes with investments in assets which are unable to reduce their contribution to climate change or where a good stewardship approach has failed. Nevertheless, widespread divestment by pension schemes is unlikely to have the required impact on the real economy’s 34 Pension stewardship and COP26 contribution to climate change. Encouraging behaviour change in compan...

Divestment is the process of selling assets already held by a pension scheme. Divestment remains a fallback strategy for pension schemes with investments in assets which are unable to reduce their contribution to climate change or where a good stewardship …

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22 Apr 2021 | Committee report linked

There is a high level of inertia amongst consumers around defined contribution pension fund choice, with most remaining in the ‘default’ fund. The Treasury has been robust in its view that default funds should not be required to move to more green alternatives, but at the same time maintains that consumers should not have to switch out of the default fund to invest sustainably. The Government should resolve this apparent contradiction. At present the Treasury is relying on a blend of disclosu...

There is a high level of inertia amongst consumers around defined contribution pension fund choice, with most remaining in the ‘default’ fund. The Treasury has been robust in its view that default funds should not be required to move to …

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22 Apr 2021 | Committee report linked

Consumers who hold defined benefits pensions have no choice as to how their assets are allocated. They rely upon their trustees. We note that previous attempts to get defined benefit schemes to acknowledge Environmental Social and Governance concerns have not been entirely successful. In its phased approach to implementing the regulations, the Pensions Regulator will need to consider how to reach smaller pension schemes. The draft regulations appear to exclude the smallest trust schemes. Howe...

Consumers who hold defined benefits pensions have no choice as to how their assets are allocated. They rely upon their trustees. We note that previous attempts to get defined benefit schemes to acknowledge Environmental Social and Governance concerns have not …

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22 Apr 2021 | Committee report linked

We note the concerns expressed about indices, in that the most popular may be carbon-intensive, and those that purport to be green may have carbon-intensive constituents. The risk remains that many consumers are unaware of the carbon- intensity of the indices that their passive investments are tracking. The Treasury and regulators should therefore ensure that all indices (whether conventional or climate- friendly) clearly set out the overall carbon footprint of the assets included within indi...

We note the concerns expressed about indices, in that the most popular may be carbon-intensive, and those that purport to be green may have carbon-intensive constituents. The risk remains that many consumers are unaware of the carbon- intensity of the …

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22 Apr 2021 | Committee report linked

The Prudential Regulation Authority and Financial Conduct Authority should move quickly to incorporate their revised remits to include climate change. We will continue to monitor their progress and ongoing approach to the risks arising from climate change.

The Prudential Regulation Authority and Financial Conduct Authority should move quickly to incorporate their revised remits to include climate change. We will continue to monitor their progress and ongoing approach to the risks arising from climate change. Type: conclusion | …

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17 Feb 2021 | Committee report linked

It is a matter of grave concern that the carbon intensity of the UK corporate sector remains aligned with global temperature rises that would be catastrophic. We welcome the news that the Bank of England is exploring how it can adjust its Corporate Bond Purchase Scheme with regard to the Government’s climate objectives. Before the Pre-COP summit in September 2021, the Bank must set out the steps it intends to take to reduce the average carbon intensity of its corporate bond portfolio to align...

It is a matter of grave concern that the carbon intensity of the UK corporate sector remains aligned with global temperature rises that would be catastrophic. We welcome the news that the Bank of England is exploring how it can …

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Pension Schemes Climate Reporting and Governance

2026

To ask the Secretary of State for Work and Pensions, what steps his Department is taking to ensure that historic communications and reasonable expectations of pension scheme members are reflected in t

2024

Correspondence with Minister for Pensions relating to Fiduciary duties and climate change

2023

2022

Correspondence to Minister of State for Media, Data, and Digital Infrastructure (Data protection legislation and communication with scheme members by pension schemes)

2021

Many schemes have already set net zero targets voluntarily. We encourage other schemes to consider whether they should also set net zero targets. While we recognise that any target must not undermine trustees’ fiduciary duties, we believe that in many cases these will be aligned.

Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change.

The Prudential Regulation Authority and Financial Conduct Authority should move quickly to incorporate their revised remits to include climate change. We will continue to monitor their progress and ongoing approach to the risks arising from climate change.

2019

Letter from Minister for Pensions re Pension Schemes Bill dated 4 November 2019