Pension scheme trustees are failing to comply with their investment duties on climate change, according to a new report.
The UK Sustainable Investment and Finance Association (UKSIF) found that only a third of a sample of trustees have complied with legal transparency requirements and is calling on the Pensions Regulator to carry out a review.
Following a change to the law in 2019, trustees must publish their approach to protecting people’s pensions from the financial risks of climate change and other issues.
Guy Opperman, Minister for Pensions and Financial Inclusion, said: “I’m disappointed and very concerned by these findings. UKSIF should pass the information to The Pensions Regulator for it to take swift action against any pension schemes not complying with the law.”
UKSIF’s report found that while the majority of pension scheme trustees believe ESG issues will affect their scheme’s assets, most trustees have adopted “thin and non-committal” policies to manage ESG financial risk.
Pension schemes have in recent months faced increased pressure to consider the effects of climate change within the sector.
Last month the Brunel Pension Partnership threatened to sack investment managers that failed to reduce their exposure to climate risk. It condemned the financial system as “not fit for purpose” for addressing the issue.
This followed on from former BoE governor Mark Carney’s warnings last year that pension schemes are at risk unless they cut their investments in fossil fuels.
UKSIF is calling on the government to set up a central registry to host trustees’ policies on ESG issues
Ben Nelmes, head of public policy at UKSIF, said: “Ministers should amend the Pension Schemes Bill when it goes through Parliament to create a public registry to let savers see how their money is being managed.”
A spokesperson for the Pensions Regulator said: “We will be developing a strategy to set out the improvements we expect over a specific time period. This is likely to include steps to identify non-compliance and plans for when we will routinely enforce against the requirements.”
“We may take action ahead of this against schemes where a failure to engage with climate risk and other ESG requirements appears to be part of a pattern of wider governance failings.”