Most pension scheme trustees are still “at the beginning of the journey” when it comes to implementing Paris-aligned investment objectives, according to Mercer partner and consulting director, Brian Henderson.

Speaking at the Pensions and Lifetime Savings Association (PLSA) ESG Conference 2021, Henderson, who is also a member of the PLSA policy board, said 95 per cent of schemes were “still playing catch up” with those who had been leading the way.

He stated: “It’s a matter of where you start really. How do you go on that journey? We have seen that clients are keen to frame their decarbonisation journey by setting a date to be net zero and they are under some pressure. I have clients where the corporate side have set out their stall and been quite aggressive to make net-zero aims by 2030, but what is the scheme doing about it?

“The challenges there are between sponsors and trustees.”

He argued that “universities are probably at the forefront of this”, pointing out that some of the schemes had “quite ambitious targets” and arguing that bold objectives needed to be balanced between the pension scheme and the corporate side.

He stressed the complexity that some schemes might find in an attempted net-zero transition, particularly when potentially looking back across as much as a decade of investment activity to establish a background to their carbon emissions.

The talk outlined a step-by-step approach for achieving alignment with the Paris Agreement objectives, calling on schemes to begin by calculating their current emissions, transition capacity and green exposures across asset classes, and setting that as their baseline.

Following this, it was recommended that schemes analyse the possibility of implementing portfolio-wide transitions by asset class, before setting measurable targets for the reduction of emissions and then finally implementing a plan before 2030.

Henderson pointed out that there were some factors which were difficult to predict or take into account, such as the markets themselves and their carbon footprints changing, using the example of Shell’s potential to lean further into renewable energy.

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