PLSA comments on pension schemes' net zero commitments

The Pensions and Lifetime Savings Association (PLSA) comments on Make My Money Matter’s report on pension schemes’ net zero commitments.

Nigel Peaple, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “We welcome that the Make My Money Matter report acknowledges the substantial progress made by large pension schemes in making commitments to addressing climate change and its recognition that many schemes that have not yet made a public commitment, nevertheless, are working hard on this issue.

“The pension sector is united in its desire to tackle climate change and, in advance of new legal requirements, large pension schemes are already assessing the impact of their investments in order to adopt strategies which will help to reduce climate change and achieve the goals of the Paris agreement.

“The legal requirements in the UK are world-leading, with the Government being the first to apply the internationally mandated TCFD requirements to pension schemes. The pensions sector wants the Government to accelerate its climate roadmap to ensure companies, asset managers and service providers catch-up with the expectations on pension schemes. Doing so will ensure that schemes have more accurate and meaningful data on which to base their strategies and commitments.

“Making a pledge to a Net Zero target is a step that many schemes have taken and we expect many more will do so, especially once further work is undertaken across the sector to embed the frameworks the industry has developed and published in the last few months. This is a complex area and schemes want to be sure their commitments are meaningful and not merely “green washing”. While Net Zero is a clearly defined target, the route to achieving it for the UK and other countries, is still far from clear. We hope that COP26 will be a catalyst to address this gap. It is also important to recognise that trustees’ fiduciary duty is to look after their members money in a way that is appropriate for the circumstances of the scheme they are in.

“Whilst the report seeks to compare, in a binary way, large DB with large DC schemes, they are very different, so this comparison is often misleading. For many schemes, in particular mature Defined Benefit schemes, a commitment to Net Zero in 2050 (or sooner) would be of limited practical benefit to the environment. This is because the vast majority of their assets are in UK government bonds, which in relative terms should already have the right “green” credentials, and in any case the assets are likely to be transferred to an insurance “buy out” provider long before 2050. Most DC schemes are much newer, and are expected to grow over the decades ahead. They invest in equities, and have much longer time horizons than most DB schemes, so the impact of a Net Zero commitment from DC schemes has the potential to be far greater.”

Mark Smith, Senior PR Manager
020 7601 1726 | [email protected]

Steven Kennedy, Senior PR Manager
020 7601 1737 | 07713 073024 | [email protected]