The chair of the Pensions and Lifetime Savings Association called on the industry to do more to tackle the risk posed by climate change at its recent conference.
Richard Butler, PLSA chair, told attendees: ““[it’s crucial] because climate risk is a systemic risk which affects every sector, every business model and, at its extremes, every company. That means, as investors or advisors to investors of over a trillion pounds, it affects us, the members of the PLSA. We simply cannot ignore it. Indeed, in my view, if we were to it would be a dereliction of our duty.”
Perhaps one of the reasons for Mr Butler’s focus on climate change is that because the oil price collapse, commodity stocks now find themselves in the value bucket, perhaps tempting potential investors.
However, the PLSA added in its statement that against a backdrop of falling share prices driven by the impact of the coronavirus, Mr Butcher said that savers, thanks in part to Greta Thunberg and Extinction Rebellion, are demanding schemes act on their environmental responsibilities.
It’s hardly a secret that many pension funds have at the heart of their investment mandate a focus on sustainable and ethical investing.
This includes playing leading roles in investor initiatives such as Climate Action 100+. The Church of England Pension Fund and the £30 billion Brunel pool – which recently threatened to sack investment managers that do not take action on the climate crisis – among them.
Climate risk regulation is also on the rise. The new ESG rules that apply to trustees, and the similar requirements being imposed on personal pension providers through the mechanism of their independent governance committees, will help to change more of the collective behaviour so that it is focused more on long term risk, and particularly, on climate risks.
“But, although these rule are a start, they are not, in our view, enough,” Mr Butcher said.
“We are not arguing for an increase in regulation, but we do believe we have a fiduciary and a social responsibility to go beyond minimum compliance.”