UK pension schemes required to disclose climate alignment of portfolios

Pension savers will, for the first time, be able to see the impact of their investments and better understand how climate risks are being considered and mitigated

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Pension schemes in the UK will be required to measure and publish how their investments support the Paris climate change goals from October this year.

That means pension savers will, for the first time, be able to see the impact of their investments and better understand how climate risks are being considered and mitigated via reports published by their pension schemes.

The new rules will ensure more than 80% of UK members – or around £1.3 trillion – will be invested in pension schemes that are helping to limit the climate risk to their members’ retirement incomes.

The Department of Work and Pensions believes this paves the way for greener pensions amid an economic transition to net zero.

Work and Pensions Secretary Thérèse Coffey said: “We are making sure our pensions can be a superpower delivering prosperity for people – and the planet – by making changes to the rules about how they are managed.

“We’re paving the way for greener pensions which can offer sustainable returns for members while accelerating our net zero ambition and supporting local jobs.”

The measures are part of a consultation response published last week as Ms Coffey visited Abbey View Produce in Bury St Edmunds, developed with financial backing from UK pension funds managed by Greencoat Capital.

It is claimed to be a world first low carbon heating and greenhouse facility, demonstrating the power of pensions and their role towards the net zero goal.

James Samworth of Greencoat Capital said: “The greenhouses are a brilliant example of how pension funds can have a direct impact. Abbey View at Bury St. Edmunds are decarbonising UK horticulture, improving food security and creating employment whilst delivering secure income for pensioners.

“Renewable energy more broadly is a great asset class for pension funds, matching their liabilities with long term, inflation-linked returns.”

The publication comes ahead of a three-week ‘Green Nudge’ trial that will see pension scheme members encouraged to learn more about making greener pension choices.