Pension schemes urged to take climate action amid 'code red' research

Institutional investors, including pension funds, have been given a “stark reminder” that action on climate change must be taken sooner rather than later, after international research warned of "unprecedented" and "irreversible" changes to the climate.

Pensions industry experts emphasised the need for institutional investors and pension schemes to take action on climate change in light of the findings of today’s report from the Intergovernmental Panel on Climate Change (IPCC).

The report, which was described by UN secretary general, António Guterres, as a "code red for humanity", explained that many of the changes observed in the climate are “unprecedented” and some, such as continued sea level rise, are “irreversible”.

In light of this, it warned that unless there are "immediate, rapid and large-scale reductions" in greenhouse gas emissions, limiting warming to 1.5 degrees or even 2 degrees will be “beyond reach”.

The findings have prompted calls for action from pension and investment industry experts, with M&G Climate Solutions Fund manager, Randeep Somel, for instance, describing the findings as a “stark reminder to all leaseholders of the planet".

He stated: “The conclusion from IPCC report and the required actions could not be clearer. Countries need to transition to a net zero emissions framework much sooner.

“We have the climate solution tools available to us whether it be the transition to renewable energy, adoption of electric vehicles, improving building efficiency, increasing levels of recycling and the incorporation of greener technology for industrial processes.

“As investors, we need to continue pushing companies to adopt science-based targets for their own emissions.

"We need to encourage highly pollutive companies to transition their business models to more sustainable paths, and we also need to channel capital to those companies that are researching and providing the climate solution tools that we all need to adopt.”

The role of pension schemes in particular has also been highlighted, with the Make My Money Matter (MMMM) campaign reiterating its call for pension schemes to commit to "robust net-zero targets", including a 50 per cent reduction in emissions by 2030.

MMMM senior finance adviser, Huw Davies, stated: “With the past five years having been the hottest on record since 1850, this latest report from the IPCC clearly shows that time is running out to tackle climate change.

"The global finance industry will prove vital in enabling our transition towards a low carbon economy and, with £2.6trn invested in UK pensions alone, our retirement savings are immensely powerful.

“There are only 84 days until COP26 in Glasgow and the immediate impacts of the climate crisis are already being felt by millions across the globe.

"That’s why we're calling on all pension schemes to commit to robust net-zero targets, including a 50 per cent reduction in emissions by 2030, directing their financial clout towards cleaner, greener investments that will save our planet as we build back better from Covid-19.

“At MMMM, we often say that there is no point retiring into a world on fire. However, this report indicates that the flames are getting higher, and as the gravity of the crisis finally sets in, we now need the government to take urgent action ahead of COP26 to ensure that all financial institutions work to tackle climate change.”

Global pension funds have previously been urged to take action on net-zero commitments, with international experts emphasising that they have an "essential role" to play in supporting the transition to net zero amid a "decisive decade".

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