FTSE 100 pension schemes endangering workers’ savings to climate risks

Many FTSE 100 DC pension schemes are leaving their UK staff’s savings “highly exposed to climate risks”, according to new research from ShareAction.

Only two of the 15 DC pension schemes that participated in the survey, the HSBC Bank Pension Scheme and the RBS Retirement Savings Plan, have changed their default investment strategies in order to reduce the carbon exposure of staff pensions.

However, ShareAction’s research also found that 13 of the 15 participants were backing initiatives to address climate risks, including the Science-Based Targets Initiative.

National Grid is one of the companies looking to reduce its environment impact, having announced public targets to reduce its carbon footprint by 80 per cent by 2050, but the pensions savings of National Grid employees working to implement this commitment remain in an investment fund that “does little to manage the financial risks of climate change”.

ShareAction hoped to assess 25 FTSE 100 schemes but did not receive responses from 10 companies, including the UK Shell Pension Plan and the BAE Systems DC Retirement Plan. One member of Shell’s DB scheme has threatened legal action over its lack of climate risk disclosure.

The research also found that eight of the 10 employer-sponsored trusts discussed climate-related risks with their investment consultants, but only three had gone on to conduct climate stress-testing of their investments.

Despite this, ShareAction revealed that six of the schemes surveyed were considering “further action” to address climate change risks.

ShareAction research officer and lead author, Paul Britton commented: “It’s no secret that companies taking credible action on climate and other sustainability issues are doing a better job of hiring and retaining talent.

“That these employees’ pensions are exposed to unmanaged climate risks is wrong and will send alarm bells ringing. These schemes will pay pensions deep into the 21st century.

“By more actively managing climate risks in their staff schemes, employers can protect employees for the long-term while demonstrating joined-up thinking on corporate sustainability commitments.”

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