Pensions Minister, Guy Opperman, has reiterated his belief that consolidated pension schemes will be better at handling new environmental, social and governance (ESG) requirements, and backed trustees’ abilities to be able to overcome challenges presented by the changes.

When speaking to the Work and Pensions Committee in the final session of its pension stewardship and COP26 inquiry, Opperman was asked how confident he was that trustees were equipped to handle what was being asked of them.

He responded: “We are damned if we do and damned if we don’t. If we don’t ask trustees to step up to the plate and embrace the consequences of climate change, we will be massively criticised.

“If we do ask, some would say this is a big learning curve for them to be engaged in. It is a big learning curve, but there is an awful lot of guidance.”

Opperman noted that there was a “genuine issue” around the long-term compatibility of reporting standards, but that he had “no doubt” that trustees were going to be able to address the issue.

“We have consulted extensively,” he added. “The degree of engagement on Task Force for Climate-related Financial Disclosures (TCFD), ESG and stewardship is off the charts.”

However, Opperman warned that really small schemes would struggle to do everything the new requirements would ask of them.

“Bigger is definitely better,” he continued. “It’s better for the members, its better for outcomes, it’s better for reporting and it’s better for trustees.

“I believe that having consolidated bigger schemes means that the reporting and the situation in respect of trustees, which is an onerous burden and serious job, is going to be easier because, instead of lots of schemes, we will have fewer both in DC and DB, where they will have a greater level of expertise.

“Because they are bigger, they will have more capacity to deal with these particular issues.”

Furthermore, Opperman stated that larger schemes would be better suited to investing in green infrastructure.

He concluded: “It is not simple stuff to invest in green infrastructure. It is much easier to be invested in gilts or bonds.

“So what we need is consolidated schemes of a sufficient scale so they can make the investments for the outcomes we all seek.”

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