PI Partnership
However, to fully do so, a series of barri- ers stopping schemes and investment managers must still be overcome. These roundtables led to us launching our latest report – Climate Investment – at our recent (and first) virtual annual conference.
Richard Butcher is chair of the PLSA
THE PLSA IS HERE TO HELP OVERCOME BARRIERS AS INDUSTRY EMBRACES CLIMATE-AWARE INVESTMENT
In it we identified seven barriers the industry faces and the ways the PLSA is helping them to overcome these constraints. So what are the barriers and what does the PLSA recommend?
If Covid-19 has proven anything, it’s that for every advancement we look to make there are a number of hurdles or barriers we have to overcome. Take a look at the past six months and you’ll see that each time restrictions have been relaxed in some way, we’ve pro- gressed in our understanding of – and our ability to fight – this virus. It may seem slow progress, but progress it is none-the-less.
The same concept can be used for many things in society including the pensions industry moving further towards fully embracing climate-aware investment. Over the course of this year, I have been involved in a number of roundtable events looking at how we, as an industry, can help mitigate the impact of climate change by investing in a climate-aware way. After speaking to more than 80 delegates representing some 60 funds directly and many hundred more indirectly we heard that there is universal appetite among schemes and their service providers to take climate change seriously and to invest with a sense that a carbon-con- strained future is coming. It’s clear to me that the industry is embracing the new future in front of it.
Clarifying definitions of climate-aware investment The PLSA recommends a joint-industry/ government review to examine the wide range of competing standards and defini- tions that currently exist, any initiatives already underway to achieve harmonisa- tion, and to identify a framework to achieve a common language and taxonomy ahead of COP-26. Addressing poor-quality climate data and information
The PLSA will encourage the government and regulators to move towards more widespread adoption of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and support measures to increase equivalence of cli- mate reporting or regulatory obligations from the top to the bottom of the invest- ment chain.
Delivering greater climate expertise and education
The PLSA will encourage more industry- led ESG training and education, work with The Pension Regulator to ensure guidance for schemes is suitable and sup- port the Financial Conduct Authority in working to design explicit climate con- duct expectations.
Articulating requirements more explicitly The PLSA will work with the International Corporate Governance Network (ICGN) in revising and renewing its model man- date and produce guidance, templates and best practice material for members and trustees.
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Enabling better climate stewardship The PLSA will further develop its guid- ance for members on what good practice expectations ought to be with regard to stewardship
services and continue to
encourage schemes and managers to adopt the Stewardship Code, and to play a pro-active role in industry stewardship groups. It also commits to working with the investment industry and regulators to find solutions to the challenges schemes face when exercising stewardship and vot- ing ‘rights’ in pooled funds.
Improving supply of appropriate climate ‘products’
The PLSA will continue to make the case to government for the issuance of a green gilt by the UK government and work with the investment industry and regulators to develop principles for ESG asset manage- ment funds/products to adhere to on ESG generally, or specifically with regard to climate. Communicating and explaining climate- aware investment The PLSA will explore the feasibility of creating a Pension Quality Mark for ESG and build on our work on implementa- tion statements to consider how best to support members in their communica- tions with beneficiaries.
It may seem like a lot of change but it’s important to note that some pension schemes are already taking a proactive and leading position on the subject and there is a genuine appetite throughout to address the issues. The PLSA is here to help schemes take those steps and overcome the challenges faced. By working together we can pro- gress – little-by-little – and work to make pensions one of the world’s leading cli- mate-aware investors.
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