EXCLUSIVE: Tackling climate change can begin with where you put your pound

Mobilising financial markets to commit to net zero is key to solving the climate crisis – we must ‘follow the money’, if we are to achieve net zero.

Our pension funds have the financial clout, the long-term investment strategy, and the engaged members to confidently move forward and transition to net zero, and doing so will be to the benefit of readers’ hard-earned savings.

This Earth Day has given me the chance to reflect on the significant steps we’ve made, and where we are headed as we approach the UN Climate Change Conference (COP26) in Glasgow this November.

Already this year, we have made huge strides by committing to climate change goals, and rallying pensions schemes and investors towards a shared target of net zero.

Readers will be aware that the Pension Schemes Act received Royal Assent in February. The act is a transformative piece of legislation that builds upon our foundational ESG policies and truly places action on climate change at the very heart of pension saving.

Under new regulations outlined in the act, trustees of occupational pension schemes are required to ensure their scheme has effective climate risk governance, aligning themselves with the 11 recommendations drawn up by the Taskforce on Climate-related Financial Disclosures (TCFD).

It also means they need to publicly report how they have done so every year, upping accountability for action.

We continue to lead the way in this space as the first country in the world to legislate for mandatory TCFD-aligned risk reporting across the whole investment chain. Using the TCFD-developed framework, trustees will need to report on governance, strategy and risk management as well as disclosing what metrics and targets they are using to assess risk and opportunity.

Our regulations will be laid before parliament in June, with a view to bringing them it into force in October, meaning we can confidently step-up to the plate at COP26 in November and say TCFD reporting for occupational pension schemes is now enshrined in law.

These requirements will be the driving force behind improved climate change governance, ensuring trustees are mitigating against the risks a transition to a low carbon economy brings, as well as putting them in a position to take advantage of the opportunities it presents.

We can also be proud that the we are the first G7 country to legislate for net zero by 2050 in support of the Paris Agreement. And just this week, this government announced plans to reduce emissions by 78 per cent by 2035, compared to 1990 levels. I am fully aware of the strides we need to take for us to reach this target and our TCFD regulations are an important step forward.

However, we need a whole economy transition. And better stewardship by pension schemes of high carbon companies will be particularly important. You can expect government action on this in the coming months – watch this space.   

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