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Managing ESG and Climate risk within your scheme’s investments

We all recognise the importance of saving into a pension scheme from an early age. We also need to apply the same thinking on risks to pension scheme investments from climate change. This is because the companies and bond issuers that pension schemes invest in, either through pooled funds or segregated mandates, must start managing capital to address climate and transition risks at the earliest available opportunity. The later they leave it, the more challenging it will become, creating a significant risk to members’ pension and retirement outcomes.

Since October 2021, pension schemes over £5 billion and all master trusts must report on climate risks in line with Task Force on Climate Related Financial Disclosures (TCFD) recommendations. These rules will apply to pension schemes over £1bn in size from October 2022. However, the regulations should not be viewed as a box-ticking exercise. Climate risks have no boundaries and impact pension schemes of all sizes. Climate change is a financial risk that all schemes should be actively managing.

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