Climate change is now a top priority fo pension providers who are increasingly moving towards low-carbon investments within DC defaults, according to new research.
Punter Southall Aspire new DC Default Strategy Survey highlighted this growing concern. The consultancy firm said there was increasing evidence that schemes are concerned that they could face potential portfolio losses triggered by the effects of rising temperatures.
The report found pension providers were prioritising moving towards a low-carbon investment as a means of delivering more sustainable long term growth their default funds.
The report covers the of major DC pension providers and analyses risk management and future growth opportunities. This covers the growth, consolidation and retirement phase defaults and how investments have been impacted by Covid-19.
Punter Southall Aspire, associate director, investment Christos Bakas says that following the pandemic’s aftermath, providers will need to be “dynamic” in their investment decisions and continue working on the risk management of their DC Defaults to ensure they provide efficient protection especially for those members close to drawing their benefits.
He adds: “Providers will need to continue working on strategies to reduce risk and ensure they can be nimble enough to make the right decisions at the right time to protect those nearing their chosen retirement age.
“They will have to decide whether catering to the flexible needs of Pensions Freedoms is worth the added risk to which members are exposed.Both providers and employers will also have to ensure members are much better educated on the need for continued equity exposure once they have started drawing benefits, if they wish to use income drawdown.”
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