A changed investment climate

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A changed investment climate

Pensions Minister Guy Opperman explains why the climate crisis should be the number one issue for every scheme

As the second longest serving post-war Minister for Pensions I have now steered a number of policies from recommendation through to legislation. One of my proudest achievements in post is to introduce new policies that tackle the greatest challenge to our future – climate change. 

From the Law Commission’s report in June 2017 to the introduction of new regulations in October 2019, my officials and I have worked at pace to deliver a sea change in the way that pension schemes consider ESG and – especially – climate risk. Building on this, we recently amended the Pension Schemes Bill, taking powers to require schemes to report in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. 

Working with pension schemes, civil society and organisations like the PLSA, we can take control of our response to climate change and change our future.

But government cannot do this alone. Our amendments to the Pension Schemes Bill are a clear steer that this is everyone’s problem. We need to make sure that every financial decision takes climate change into account. That means all of us. No pension scheme is too small to make a difference.  

I appreciate the new provisions in the Bill have caused consternation in some quarters, but that is unwarranted. The legislation places duties on trustees to review and assess the exposure of the scheme to climate change, and to determine investment strategies and targets. It does not give government a power to determine investment strategies or targets. These will remain matters for trustees alone.

I realise the TCFD recommendations are unfamiliar to many and can be daunting to apply to pension schemes. That’s why my officials and I have been delighted to support Stuart O’Brien of Sackers, and others on the Pensions Climate Risk Industry Group, developing the first pension scheme-specific guidance. This will be launched on Thursday 12 March at the PLSA Investment Conference. Stuart and his team have done excellent work in integrating TCFD into the trustee decision-making process and ensuring it is relevant for governance bodies.

When the Bill completes its passage, we will formally consult on how we move towards mandatory TCFD reporting for large pension schemes. I will use the evidence to assess what schemes also need from asset managers and insurers as we need disclosures along the whole length of the chain.  

Climate change is a risk more profound and far-reaching to pension savers’ finances than the more immediate concerns of interest rates, inflation, individual company performance or the market cycle. The very fact that it is not a cyclical risk, and that we are well into unknown territory without a map, does not give us permission to ignore it.  

We all know the tools to manage climate risk, and we should embrace the opportunities of the low-carbon transition. 

I would like to thank the PLSA, Stuart, and everyone else who has helped to deliver the Pensions Climate Risk Industry Group guidance. I encourage you to respond to that consultation. 

And if you go, I hope you have a very enjoyable and enlightening conference.