PLSA unveils climate-aware investment recommendations

The Pensions and Lifetime Savings Association (PLSA) has unveiled a series of recommendations to help schemes overcome barriers that prevent them fully embracing climate-aware investment.

After speaking to more than 80 delegates representing some 60 funds directly, and many hundreds more indirectly, in a series of virtual roundtables over the summer, the PLSA found that in some cases there was an “immature infrastructure” around climate-aware investing, such as inconsistent definitions and language, as well as limited or poor quality data or lack of investment products with a full range of necessary characteristics.

The trade body recommended a joint-industry/government review to examine the wide range of competing standards and definitions that currently exist, any initiatives already underway to achieve harmonisation, and to identify a framework to achieve a common language and taxonomy ahead of the 2021 United Nations Climate Change Conference.

It also said it would encourage the government and regulators to move towards more widespread adoption of the Taskforce for Climate-related Financial Disclosures’ recommendations, and support measures to increase equivalence of climate reporting or regulatory obligations from the top to the bottom of the investment chain.

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 management products to adhere to on ESG generally, or specifically with regard to climate.

To aid better communication around climate-aware investment, it will explore the feasibility of creating a Pension Quality Mark for ESG and build on its work on implementation statements to consider how best to support members in their communications with beneficiaries.

Richard Butcher, chair at PLSA, said: “Climate change is a massive issue and the pensions industry has the opportunity to help mitigate its impact by investing in a climate-aware way. This report highlights some of the barriers to climate aware investing – none of which are insurmountable – and proposes some actions to overcome them.”