PI Partnership – PLSA
Under the plans, the government will make TCFD reporting mandatory by 2025. This roadmap is not perfect with some synchronisation issues unresolved, but – as we stated in our A Changing Cli- mate report – it is essential that it is used across the investment chain.
Joe Dabrowski is head of defined benefit, LGPS and standards at the PLSA
GOVERNMENT PLANS FOR MOVE TO CLIMATE-AWARE INVESTING ARE ACHIEVABLE
While 2020 was overwhelmed by the on- going Covid-19 pandemic it was also a year where great strides were made in en- suring that environmental, social and governance issues were at the forefront of investors’ minds.
Earlier this month, chancellor Rishi Su- nak announced the government’s plans for the future of financial services, outlin- ing its ambitions for the UK to remain an open and attractive international financial centre. A big part of that initiative is to ex- tend the UK’s global leadership in green finance and financial technology. As you can imagine, this is of great inter- est to us at the Pensions & Lifetime Sav- ings Association (PLSA) as we evaluate the impact and influence the pensions in- dustry could have on shaping a cleaner, greener future.
One of the key announcements made by the chancellor was the publication of a roadmap to introduce mandatory Task Force on Climate-related Financial Dis- closure (TCFD) based reporting. In a nutshell, the TCFD sets out to ensure that companies consistently disclose their climate-related risks. It requires compa- nies to release information on climate risks, enabling investors and stakeholders to make informed decisions. Further- more, it enables businesses to identify any material risks that they may be exposed to, to help protect themselves against the im- pending climate change risks.
One important step along the net-zero by 2050 target is the announcement that the government will issue its first sover- eign green bond in 2021. The PLSA has, for some time, made the case to govern- ment for issuing a green gilt to help fi- nance projects that tackle climate change, finance much-needed infra- structure investment and create green jobs across the country. It will be inter- esting to see how it aligns with the new 10-point plan announced in November by the prime minister. Finally, the chancellor also pledged that the UK will implement a green taxonomy – a common framework for determining which activities can be defined as environ- mentally sustainable – which will im- prove understanding of the impact firms’ activities and investments have on the en- vironment and the transition to a sustain- able economy.
This UK taxonomy will take the scientif- ic metrics in the EU taxonomy as its ba- sis and a UK green technical advisory group will be established to review these metrics to ensure they are right for the UK market.
This is a welcome decision as the PLSA has been calling for a joint industry and 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 taxono- my ahead of COP26.
Closer to home, the PLSA has also been working on ways to help in the shift to climate-aware investing. For example, as we said in A Changing Climate, the PLSA will work across the sector to produce guidance, templates and best practice
52 | portfolio institutional December–January 2021 | issue 99
material for members and trustees. With the Pensions Schemes Bill reaching its final stages, including the important cli- mate amendments, we also look forward to working with government and regula- tors to implement the next steps on this vital agenda. We will also develop our guidance for members’ good practice expectations with regard to stewardship services, con- tinue to encourage schemes and manag- ers to adopt the Stewardship Code and play a pro-active role in industry steward- ship groups. We are also committed to working with the investment industry and regulators to find solutions to the challenges schemes face when exercis- ing stewardship and voting ‘rights’ in pooled funds.
While this may seem like a lot of change all at once, it’s important to remember that the majority of pension schemes are already pro-actively seeking to invest in a climate aware way, and many have been leading the debate and driving change, not just in the UK, but globally, for some time.
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