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Climate change key focus for UK pension schemes

10 October 2019

Climate change is becoming a key focus for UK pension schemes, as ESG factors grow increasingly important to investors.

Nearly three quarters (73%) of schemes believe that they should positively influence climate change action, according to the findings from XPS Pension Group’s annual conference.

As part of the London event, attended by over 400 trustees and employers of UK pension schemes, attendees were asked about their investment approach and attitude to climate change. Three fifths (60%) described their overall approach as responsible or sustainable, while 40% said they continued to have a traditional investment approach. A quarter (25%) of those questioned believed climate change was a risk out of their control.

Pension schemes are now required to incorporate environmental, social and governance factors into their investment strategies.

Simeon Willis, CIO, XPS Pensions Group, said trustees have a responsibility to meet the demands of scheme members, who want their money invested appropriately.

He said: “The world is changing and so must the way we invest. UK pension schemes underestimate the power they have to influence change by incorporating ESG and sustainability into their long-term strategy. Investments are no longer just about risk and reward, an additional ESG lens and measurable outcomes for wider society need to be a considered.

“Trustees need to evaluate their investment managers and demand more, standing up for what they and their members want. This is an opportunity for change, not just a box ticking exercise.”

Paul Cuff, CEO, XPS Pensions Group, added: “Pension schemes, with the vast assets under management, can be a great force for positive change. At the same time, at the level of the individual, there are big challenges around keeping members safe in the options and freedoms they choose. Our conference looked at all of these areas with a real focus on the practical steps we can all take to make things better.”