The Pensions and Lifetime Savings Association (PLSA) has urged companies to properly disclose their climate impact in its updated Stewardship and Voting Guidelines, highlighting this as “paramount” to their future success.

The guidance encouraged schemes to look for evidence that companies are taking Task Force on Climate-related Financial Disclosures (TCFD) seriously as part of their investment plans to help address the climate emergency.

It also urged companies to be cautious on how they attribute pay to their business leaders, particularly where they have benefited from government support, and to ensure their governance arrangements are diverse and inclusive.

The guidance was updated following a “substantial review” in 2020, with three key areas identified in the new guidelines: climate change, executive remuneration, and diversity.

PLSA director of policy and advocacy, Nigel Peaple, commented: “Investors recognise how incredibly tough the past two years have been for companies to navigate.

“While being empathetic to these issues, AGM season is an opportunity for pension scheme trustees and their asset managers to engage with company directors, to revisit environmental, social and governance policies and seize the chance to build back better than before.

“As part of this we have strengthened the language on expectations on TCFD disclosures, to which all companies should be held accountable.

“And while climate change matters remain vital to address, it’s also important to not forget the other aspects of environmental, social and governance (ESG) investing.

“This is not only the right thing to do but also that numerous studies have shown that companies that uphold the highest ESG standards tend to financially outperform as well, adding value to the millions of pension savers they count among their shareholders.”

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