The Pensions Regulator has warned that many trustees and managers of DC schemes are not paying proper attention to the risks and opportunities of climate change.
Its annual survey of DC schemes shows that less than half of trustees (43 per cent) are actively considering climate change in their investment strategies.
Although this figure has doubled since 2019, TPR says it shows there significant progress still to be made.
The survey looked in more details at these schemes where trustees were currently ignoring climate risks. Of this group 19 per cent said they were planning to review this decision in the near future. However 21 per cent of these trustees stated that climate change was not relevant to their scheme, a figure which TPR described as “concerning”.
This survey, carried out before the Covid crisis, surveyed 200 single-employer and multi-employer group schemes and 16 master trusts between January and March 2020.
TPR’s executive director of regulatory policy, analysis and advice, David Fairs says: “Our survey shows trustees of DC schemes must give greater attention to the risks and opportunities facing their schemes from climate change.
“The Pension Schemes Bill – which we expect will become law very soon – will see requirements for the effective governance of climate change risks and opportunities written explicitly into pensions law in the most comprehensive way to date.
“Trustees already need to consider climate change as part of their statement of investment principles but the new Act will significantly increase the expectations placed upon them.
“Although a phased approach means the new Act won’t affect all DC schemes to start with, it will increase the expectations savers have of those responsible for their pension pots when it comes to climate change.
“Climate change risks will threaten pension savings right across the industry. This means trustees should build their capacity in this area now, so they can understand what climate change will mean for their scheme and so be better placed to make decisions contributing towards good outcomes for savers.”
In the spring the regulator will publish a strategy setting out how it will help trustees meet challenges around climate change.
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