“That’s because climate risk is a systemic risk which affects every sector, every business model and, at its extremes, every company,” Mr Butcher will say. “And 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.”
Against a backdrop of falling share prices driven by the impact of the coronavirus, Mr Butcher will say that savers, thanks in part to Greta Thunberg and Extinction Rebellion, are demanding schemes act on their environmental responsibilities.
The PLSA and its members have for many years been at the forefront of progressive climate risk policy.
This includes playing leading roles in investor initiatives such as Climate Action 100+. The Church of England Pension Fund and the £30bn Brunel pool – which recently threatened to sack investment managers that do not take action on the climate crisis – among them.
Funds and savers are investing more for good and engaging with their investee companies: €2.84trn of UK managed assets were voted at AGMs on sustainability grounds, according to a 2018 UKSIF study.
Climate risk regulation is on the rise too. The new ESG rules that apply to trustees, and the analogous requirements being imposed on personal pension providers through the mechanism of their IGCs, will help to change more of our 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 will say.
“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.”
Mr Butcher will highlight five ways the PLSA is supporting workplace pension schemes in tackling climate change in 2020:
1. Data – “We want to support a well informed and effective public debate, so we’ll be drawing together the key facts and statistics related to pension funds and climate change investing to help do that.”
2. Guidance – “We will support our members with guidance that keeps you informed, up to date and ready to act. Especially when it comes to regulatory change. Climate risk is also a major part of our 2020 Stewardship and Voting Guidelines – published in February – which calls for companies to behave responsibly, and for pension funds to hold company directors and their own asset managers accountable when they don’t. This year we’ll also produce guidance on implementing the Shareholder Rights Directive II, which aligns with our aims of increasing transparency and accountability, and encouraging long-term thinking from investors.”
3. Standards and rules – “The PLSA will keep working with Government, regulators, industry bodies and financial services companies to improve the transparency and quality of climate change-related investment information to help trustees to understand their risks and so make informed decisions.”
4. Thought leadership – “We’ll look to some of the leading figures in the industry to help guide us, to help drive change […] asking some of them to contribute thought leadership pieces to a portfolio report on climate change, ESG and stewardship challenges ahead and how we can combat them.
5. Speaking to schemes – “It’s becoming increasingly clear to us that the highly intermediated investment chain is currently not working effectively in supporting schemes to live up to their new duties on climate change. Tell me more. I want to talk to some of our local groups, Fund CEOs, CIOs, members and anybody else. I’ll be working with the PLSA team to convert your feedback into some recommendations for action, ready in time for the annual conference in October.”
The PLSA Investment Conference takes place in Edinburgh from 11-13 March and brings together 1000 pension professionals including CIOs, pension managers, trustees, consultants and finance professionals and their advisers for the UK's largest conference of its kind.
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