New pension rules inadequate to protect savers from climate change risks

New pension rules requiring providers to disclose environmental, social and governance (ESG) considerations are “not enough” to protect savers from the risks posed by climate change, according to the chief executive of the UK Sustainable Investment Forum (UKSIF), Simon Howard.
Speaking at the 2019 Sustainability Summit, Howard praised the progress that had been made, but insisted that more needed to be done to protect the next generation of pension savers.
He explained: “Late last year, the government changed pension scheme rules so that trust-based schemes must update their investment principles to set out how they take into account ESG risks.
“This is where I tell you it isn’t enough. We need to go much, much further and far, far quicker.”
Howard described the situation as giving the younger generation “the biggest hospital pass in history”, whereby young people were, in rugby terms, being passed the ball so the older generation “avoid being flattened by the huge forward bearing down on them”.
He encouraged pension scheme trustees and members to ask questions and insist on answers from their advisers and fund managers on what they are doing to invest sustainably, and called on providers to ensure they can provide satisfactory answers.
Furthermore, Howard called on the government to establish a new sustainable finance committee, with representatives from all financial regulators and from within the financial industry, to assess and take action on climate-related risks.
Howard detailed: “It should be chaired by the cabinet office and it should sit at the centre of government. It should bring together climate science and policy with financial regulation.
“I know that in climate, the risks and opportunities are across most departments, most financial sectors, most industries, we need top level responses and approaches across all of them.
“We want this new committee to be powerful, to be able to commission inquiries into areas of finance that may not be managing climate-related risk responsibly and we want the committee to have the power to require regulators to take action.”
Although he praised the financial regulators for the work that they have done so far, he encouraged the government and the regulators to work together, coordinating their work and actions to tackle the risks that are posed by climate change.
In his concluding remarks, Howard said that he believed higher minimum standards of stewardship were required, stating: “Pension funds exist to give people a secure retirement. We want and need pension schemes to be the best exponents of responsible investing.
“This need will fundamentally effect the license to operate of all pension providers and schemes.”
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