On the go: Nearly three-quarters of pension professionals said they lack vital information necessary for them to report on climate risk in their pension schemes, according to a survey from the Pensions and Lifetime Savings Association.
The survey, carried out by Crédit Agricole’s financial services subsidiary Caceis in conjunction with the industry body, polled 93 PLSA members and discovered that 70 per cent attribute the absence of vital information in part to problems obtaining the data from their asset managers.
The research highlights a problem facing many schemes with the impending introduction of a mandate requiring them to report on climate change risk, with a penalty fine levied should they fail to do so, as Pensions Expert reported in August.
For schemes with more than £5bn in assets, it is expected that this reporting requirement could come into force as early as 2022, leaving schemes with just two years to address their data concerns.
The risk posed by climate change is already having an effect on scheme behaviour, the survey found, with 49 per cent of respondents stating it is having a “moderate impact” on their investments and an additional 17 per cent said it is having a “high impact”.
More than half (54 per cent) of respondents said they were looking to increase their exposure to environmental, social and governance funds next year, and a clear majority (82 per cent) were focusing on selecting managers who can fully integrate ESG criteria into their investment processes.
Despite this, 80 per cent of respondents highlighted a lack of consistency about ESG-reporting standards as being the biggest challenge they face when looking at integrating these factors and combating climate change.
Pat Sharman, managing director of Caceis, said it is critical that data on climate change risk becomes easier to access in order for pension schemes to have the information they need to assess and manage climate change risk within their investments.
“Climate change risk reporting, in line with recommendations of the Task Force on Climate-related Financial Disclosures for larger schemes, will create some challenges for pension schemes that don’t have the necessary framework in place to measure their exposure to climate risk,” she said.
“Pension schemes understand the risk that climate change poses and want to turn that concern into action, but they are limited in what they can do because it is difficult to obtain the data.”
Ms Sharman continued: “Schemes have the opportunity to direct their investments into areas where it has a positive impact, but only if schemes have the tools to independently assess factors such as the carbon footprint of the underlying securities they hold within their pooled funds or segregated mandates.”
