PLSA AC 21: Almost a third of pension schemes have no plans to commit to net zero

Nearly a third (30 per cent) of pension schemes in the UK have no plans to commit to net-zero carbon emissions, according to research from Aon.

Presented at the Pensions and Lifetime Savings Association (PLSA) Annual Conference 2021, Aon’s 2021 Responsible Investment Survey also showed that 17 per cent of schemes were unlikely or did not know whether they were going to set climate-related metrics.

On the other hand, 20 per cent of schemes surveyed had already committed to net zero, while half (50 per cent) had not yet committed but planned to do so.

Furthermore, 10 per cent of schemes had already implemented climate-related metrics, 41 per cent were very likely to implement them, and 32 per cent said were somewhat likely.

The survey assessed 121 pension schemes, comprising 96 defined benefit (DB) and 25 defined contribution (DC) schemes.

More than half (52 per cent) of DC and 44 per cent of DB schemes had made portfolio changes due to their responsible investment policy.

Furthermore, 64 per cent of DC and 50 per cent of DB schemes said that they intended to increase or significantly increase their responsible investment.

Of the schemes that do invest responsibility, 65 per cent cited their belief that it would lead to better risk-adjusted returns as a factor in why they responsibly invest, up from 50 per cent in 2019.

Meanwhile, 44 per cent cited making a positive social or environmental impact as a factor, up from 35 per cent in 2019, while 40 per cent said it was to increase member engagement, up from 21 per cent in 2019.

“It always surprises me how little importance our industry has seemed to place on the view of the beneficiary in this debate,” said Aon co-head of responsible investment, Tim Manuel.

“So, I was very pleased to see that four in 10 trustees recognise that their membership is very engaged with issues relating to climate sustainability and there is a huge pension engagement opportunity that comes with that.”

When asked what global trends worry them, the most commonly cited concern by pension schemes was climate change, with 68 per cent stating they were concerned with the risks it posed.

Nearly a third (30 per cent) cited cyber risk as a concern, 26 per cent were concerned by biodiversity loss, 25 per cent were worried by socioeconomic inequality and 19 per cent were concerned by protectionism.

Despite the Covid-19 pandemic, just 17 per cent of schemes said they were concerned by health crises.

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