A changing climate: How pension funds can invest for the future

Pension schemes and their service providers take climate change seriously and want to invest with a sense that a carbon-constrained future is coming. 

But there are barriers to their being able to do so. There is an immature infrastructure around climate-aware investing, such as inconsistent definitions and language, as well as limited or poor quality data or lack of investment products with a full range of necessary characteristics. 

Other challenges arise from limited expertise and training on climate change issues across the investment chain, including the senior decision-makers at pension schemes (most notably on trustee boards). In other cases, the issues are around structural challenges in the investment chain and the need for better alignment of duties and disclosures along it. 

Pension schemes cannot resolve these issues alone if they are to deliver the change that is necessary. A system-wide approach is needed. 

After speaking to more than 80 delegates, representing some 60 funds directly and many hundred more indirectly, in a series of virtual roundtables in summer 2020, we've identified some key recommendations to overcome these obstacles.