Only 5 per cent of the UK’s largest pension funds have climate change policies in place despite a pending requirement for trustees to justify any decision to disregard environmental, social and governance factors.
In the wake of continuing concerns about climate change, the Department for Work and Pensions announced that the rules on ESG issues will come into place from next September.
According to the Financial Times, law firm Pinsent Masons analysed 43 funds, finding none had a target for investment in energy-efficient or sustainable assets.
Pinsent Masons head of pensions and long-term savings Carolyn Saunders says: “It has been apparent for some time that climate change issues can affect financial returns. However, in the absence of a standardised approach to climate-risk management in investments, most trustees are unsure how best to deal with the issue.”
The analysis also shows none of the pension funds examined excluded particular funds from clients’ portfolio due to them not meeting a climate criteria.
Three quarters of pension funds analysed include mention of ESG, but still do not have specific targets or policies in place.
Money Marketing reported last month that the FCA is looking to crack down on climate change, after a discussion paper revealed over 90 per cent of workplace pension schemes have their savings in default investment strategies that do not consider climate change.
FCA chief executive Andrew Bailey said: “The FCA can play a key role in providing more structure and protection to consumers for green finance products and ensuring that the market develops in an orderly and fairway which meets users’ needs.”