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Sustainable Pensions

What you need to know

What can pension funds do to reduce the impact of climate change? The answer is a lot!

With a total global investment of over $50 trillion, institutional pension funds will play a pivotal role in scaling climate solutions that will help the world successfully transition to a low carbon economy.

Employers, managers and trustees of pension funds should therefore expect growing demands from their employees, regulators and shareholders around the actions being taken to address the climate impact of their pensions.

Five things you need to know about sustainable pensions

Accounting for climate helps future-proof pension funds.

If your business has defined benefit (“DB”) pension plans, it is important to understand the exposure of your pension funds to climate-related risks. In particular, the ways that the funds’ investment managers are engaging with investee companies to address climate change - to help protect the funds’ future growth.

Climate solutions also offer a huge financial opportunity.

As long-term investors, your pension funds have the opportunity to invest directly in the infrastructure that is needed to transition to a low carbon economy, such as in renewable technologies and sustainable infrastructure.

Your pension scheme should connect with your net zero goals.

Many businesses have set goals to decarbonise their organisations ahead of the UK’s legal target of achieving net zero by 2050. So, the climate approach being taken by your pension funds should align to the wider climate change strategy being pursued by your business.

Sustainable pensions can also engage your people.

Employees are increasingly looking for their pension scheme investments to make a positive impact on the environment and society. Where defined contribution (“DC”) pensions are offered to your people, consider providing a range of sustainable pensions options for employees to select from.

New reporting standards are in for the largest pension schemes.

The new Occupational Pension Schemes Climate Change (Governance and Reporting) Regulations 2021 require the larger UK pension schemes to publish annual TCFD-aligned reports. These disclosures will outline the governance and risk management measures in place to address climate-related risks and report the pension funds’ carbon emission metrics and targets – so watch this space.

Our net zero resources.

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