As transparency rises, members will become more informed and this will empower them to apply pressure to drive change if trustees are not taking climate change seriously.
As well as members applying pressure, activists will keep the spotlight trained on these issues.
Outfits like Client Earth use information in the public domain to highlight where organisations are not fulfilling their duties to manage the financial risks from climate change.
The risk of legal action is another strong force, in that it would only take one legal case to put everybody else on notice.
The potential impact on reputation should also not be overlooked.
Future landscape
Where does the debate go from here? Having declared a state of ‘climate emergency’, ministerial pressure is sure to continue.
The UK’s Green Finance Strategy, published in July, set the expectation that large pension schemes will report on their climate-related practices by 2022. It also announced that The Pensions Regulator will consult on climate guidance. These steps will encourage greater focus on climate change by pension schemes, yet without imposing any additional legal requirements.
I expect soft encouragement will be the order of the day, as compulsion would conflict with the current legal framework for trustees.
For the time being, the focus is much more likely to be on enforcement, rather than reform – that is, ensuring that schemes are adequately fulfilling their duties as they now stand.
Claire Jones is head of responsible investment at LCP
