GreenBiz: Is Your Company's Pension Plan Aligned With Its Climate Commitments?

Published February, 2019

By Michael Holder

The retirement savings of hundreds of thousands of workers could be “highly exposed” to climate-related risks, with some of the United Kingdom’s biggest company pension schemes sticking with investment strategies that fail to address exposure to carbon intensive assets.

That is the key conclusion from new research by ShareAction, which warns companies are failing to match their sustainability efforts with “climate-safe” pensions for their staff. There is a frequent disconnect, the report argues, between company commitments on tackling climate change and the level of climate risk protections afforded to their employees’ savings through corporate pension schemes.

The findings are based on a survey of 25 FTSE 100 companies with some of the largest defined contribution (DC) pension schemes. The analysis includes a host of big corporate names, including Barclays, Lloyds, Tesco, Unilever, Rolls-Royce and Diageo. It was carried out by ShareAction to assess how the companies’ pension schemes seek to protect staff savings against climate-related financial risks.

A growing number of institutional investors fear that many listed companies, especially in carbon-intensive sectors, are exposed to a wide range of climate-related risks, including the increased risk of physical climate impacts such as storms or droughts and so-called transition risks, whereby the shift towards clean technologies leads high carbon assets stranded and over-valued.

Of the 25 company pension schemes contacted, 15 responded to the survey, covering around 1 million workers and $22.57 billion of assets under management, according to the campaign group. However, only two respondents — HSBC Bank Pension Scheme and RBS Retirement Savings Plan — said they had changed their default investment strategies to reduce the climate-risk exposure of their staff’s pensions.

Six more said they were considering further action to address climate-related risks in their investments, including Aviva Staff Pension Scheme and Unilever’s Pension Fund DC Investing Plan.

Yet at the same time, most companies taking part in the survey — 13 of the 15 — publicly have backed initiatives aimed at addressing climate risks, such as the RE100 campaign to source 100 percent renewable power, the Science-Based Targets initiative — through which firms set emissions reduction goals in line with climate science — and the guidelines set out by the Taskforce on Climate-related Financial Disclosures (TCFD), the research shows.

ShareAction said climate change posed a “systemic threat to the global financial system,” and that major U.K. employers therefore needed to both better protect their staff against climate risks and to help them benefit from low carbon growth opportunities.

Read more