On the go: Pension schemes expect to have fully integrated climate risks into their business processes by 2026, according to a poll carried out by Willis Towers Watson.
During its recent Climate Resilience and Financial Stewardship Summit, WTW polled 70 separate UK-based pension schemes on their climate risk integration plans.
Figures show that half of the 70 UK pension schemes believe that they will fully integrate climate risks into their decisions in less than a year, with 6 per cent expecting to do so within six months and 25 per cent of respondents assuming that it will take between six and 12 months to implement it into their major business decisions.
Meanwhile, 19 per cent of respondents reported that they already integrate the risk into their schemes.
Furthermore, WTW also mentioned that 17 per cent of those surveyed have already put in place carbon journey plans, with 57 per cent of UK pension scheme representatives currently considering how to reduce climate risk using a carbon journey plan.
Only around a quarter (26 per cent) have yet to begin creating such a strategy.
Asked how they plan to meet the governance challenge of climate risk management, nearly 44 per cent of respondents said they had no single solution, and that a range of measures would be needed to fully tackle the issue.
These include greater delegation to subcommittees, greater delegation to external parties, and increased frequency and length of trustee meetings, WTW reported.
Lastly, 43 per cent of pension scheme representatives said that a lack of data was the most common challenge they faced in assessing and managing climate risks.
Trustees’ own knowledge was the second most common challenge, with 24 per cent of respondents identifying this as an issue, followed by tools (13 per cent), resources (9 per cent), and expectations (8 per cent).
Dave Aleppo, head of investment advisory services at WTW, said: “While the task is huge, mindsets are shifting faster than I have ever seen.
“Climate is already a key metric of success for most pension schemes, and with global assets representing around $100tn [£71tn], the scale of resources that will be unleashed to tackle climate change and transform the world economy when climate is integrated into every decision will make a significant difference.”
He continued: “As a result, we’re already seeing a steady change in the culture of the entire investment industry that supports asset owners.
“When we work with pension funds to evaluate asset managers, not only do we ensure that they have climate and stewardship embedded in their investment processes, we also prefer those organisations who have genuinely accepted and embedded the fundamental culture shift that’s needed.”
Pensions Expert has seen many pension funds putting carbon journey plans into action in recent weeks, with several outlining their net-zero ambitions.
As previously reported, the South Yorkshire Pension Fund, Wiltshire Pension Fund and TPT Retirement Solutions became signatories to the Paris Aligned Investment Initiative, where schemes commit to decarbonise their investment portfolios by 2050 and increase investment in climate solutions, in line with a 1.5C net-zero emissions future.
The funds will be using the net-zero investment framework as the practical basis for delivery of their targets, with the goal to maximise the contribution they make in tackling climate change.
The Strathclyde Pension Fund has also agreed to a series of commitments to cut its carbon emissions, including targeting net-zero by 2050, while Co-op Pensions hopes to hit the target 10 years earlier, by 2040.
