UK pension funds are ‘worryingly complacent’ on climate change

A government survey of the top pension funds in the UK has found mixed results on the group’s approach to climate change.

The Environmental Audit Committee requested information from the leading 25 funds on how they are responding to climate risk and whether it is changing investment decisions.

The Committee split the responses into three categories. It identified a ‘more engaged’ group of 11 funds, which supported climate-related financial disclosures and most were committed towards doing so. This included 7 of the largest funds in the country.

A second group of 8 remained engaged but were more cautious and less committed to reporting on climate change. While there was some evidence of responsible investment, it was less embedded within its work.

A quarter of pension funds surveyed were seen as less engaged and had not even considered climate change as a risk. This group displayed “little reported evidence of strategic input or oversight from the pension scheme’s governing body”, according to the Committee. 10 of the funds also had no plans to report on climate risk.

The encouraging news from the poll showed that 20 of the funds were able to list at least one action taken on climate risk, and almost half had discussed the issue at Board level.

Mary Creagh MP, Chair of the Environmental Audit Committee, commented: "It is encouraging that a majority of the UK’s largest pension funds say they are taking steps to manage the risks that climate change poses to UK pension investments. But a minority of funds appear worryingly complacent. Pension funds should at least assess the exposure of their assets to the physical, transition and liability risks from climate change that will materialise during savers’ lifetimes.”

The survey is part of the Committee’s ongoing inquiry into green finance in the UK, and the government’s stated aim to develop ‘world-leading’ capabilities in the sector.