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“There’s no such thing as a pension on a dead planet”

18 Mar 2020

Richard Butcher

chair of the PLSA

2019 was a remarkable year for the sudden acceleration of society’s recognition of its environmental responsibilities, thanks to Greta Thunberg and Extinction Rebellion.

Extinction Rebellion raided the PLSA’s Local Authority Conference last May asserting: “There’s no such thing as a pension on a dead planet.”

This was a sobering and challenging moment, not least of all because it was impossible to dispute the point. As I reflected further, it occurred to me the less we do, as investors, to preserve the planet, the more we do to render ourselves obsolete.

The new ESG rules that apply to trustees will help to change our collective behaviour, so it is more focused on the longterm risk to the planet.

But, although a start, these rules are not enough. We have a fiduciary and, I think, a social responsibility to go beyond just compliance. That’s not to say we ignore the complex practical and legal restraints that apply to us, not least the risk that if we go too fast or too hard we could do significant societal or economic damage. It’s better to do this right than to do this quickly, but still, I think, we have to push the boundaries.

Climate risk is a systemic risk which affects every sector, every business model and, in its most extreme forms, every company. It is, put simply, not just about values but about value. That means it affects pension funds.

UK assets under management in funds “managed with reference to responsible and sustainable criteria” exceeded £100bn at the end 2018.

We can be proud of the start made, but we can’t be complacent. That’s why the PLSA has been tackling the challenge of ESG not just since before Greta stopped going to school but, in fact, from before she even started school.

The question is, in the words of Mark Carney, “what’s your plan?” and what are we doing to help you?

We have research in the field right now on how schemes are integrating ESG and last year we published a guide on ESG and stewardship. We continue to work with all parties to improve the quality of information disclosed to schemes.

The PLSA’s Investment Conference will also, for the first time, have a specific stream on climate change and we’ll be launching a Made Simple Guide on climate change indices. There will be a session on the Task Force on Climate-related Financial Disclosures, at which we’ll launch the cross-industry Pensions Climate Risk Industry Group consultation on guidance for asset owners on considering, monitoring and reporting on climate risk. That guidance will explicitly encourage schemes to consider how and when to exercise their vote on companies’ approaches to climate risk. Guy Opperman will also be there to talk on all things related to the matter.

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