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by Staff GBAF Publications Ltd

Almost three quarters (74%) of pension schemes have net zero plans in place, or will do within the next two years, a Pensions and Lifetime Savings Association (PLSA) survey has found.

The survey comes as the pensions industry meets this week in Edinburgh for the first time since the pandemic-imposed lockdowns two years ago for the PLSA’s annual Investment Conference.

Climate risk is an important focus of the conference which will feature dedicated plenary sessions, including with leading pensions Chief Investment Officers and responsible investment experts, on how pensions schemes will invest for the green transition.

The latest survey, conducted in the run up to the conference, shows that pension schemes are making progress towards net zero commitments. With new Taskforce on Climate-related Financial Disclosures (TCFD) requirements coming into force, the number of schemes making such commitments is expected to grow further still.

The news comes as climate change and Environmental, Social and Governance (ESG) stewardship continue to raise in importance and have become a central part of pension schemes’ investment strategy, with identifying suitable performance measures and devising frameworks to report on them also rising in importance.

Additionally, The Pensions Regulator (TPR) and Department for Work and Pensions (DWP) now require larger schemes to use the TCFD framework to report on their portfolios.

The survey found two-thirds (63%) of schemes have started working on their TCFD report, with over half (55%) saying they are within the scope of the reporting deadline and so plan to publish one this year.

More than a quarter (28%) have gone a stage further and said that they have already published their TCFD report, despite it not being a mandatory requirement.

In terms of stewardship, two-thirds (68%) see their key priority as investors, as being climate transition plans. Over half (56%) see these being net zero targets, while around a third (37%) see board diversity and human rights (35%) as key priorities.

In terms of non-climate related ESG factors, diversity and inclusion (51%) and human rights (49%) are seen to be the most important. These are also the areas where most see their organisations focusing on in the next 18 months.

Nigel Peaple, Director of Policy & Advocacy, PLSA, said: ““Our survey, which reflects responses from over 90 pension schemes, found that around three quarters, either have, or will shortly have, a plan to align their investments with a net zero objective by 2050.  Many pension schemes are already assessing the impact of their investments in the context of the goals of the Paris agreement.

“Striving to improve investment practices, and robust transparency standards across the investment chain, are an essential part of ensuring schemes can act as responsible stewards on behalf of millions of UK pensions savers. As we enter the next phase of scheme reporting, it is important that the largest companies and asset managers meet institutional investors’ expectations, by enhancing their climate impact disclosure, as well as fully implementing their regulatory responsibilities within the TCFD regime.”

For more information about the PLSA’s Investment Conference click here.

The research was conducted by the PLSA among its members between 20/04/2022 and 16/05/2022. A total of 91 members responded to the survey.