“The UK pension industry needs to wake up: Climate change is fundamentally an economic issue,” says Topping
The choices investors make over the next 10 years are vitally important if the world is to limit global heating, reverse the destruction of the natural environment and meet the UN Sustainable Development Goals, says Nigel Topping, the UN High Level Climate Action Champion.
Speaking on a live webcast hosted by pensions and investment advisory firm Isio, Topping, appointed by the UK Government to help drive action on climate change, stressed the responsibility the UK pensions industry has, over the next 10 years, to ensure the pool of GBP3 trillion of UK pension assets is invested sustainably.
He highlighted the low levels of understanding in parts of the pensions industry and that often the number of terms being used by asset managers to describe a greener approach often “bamboozled” trustees. Good advice he felt was vital and the sooner the industry “woke up” to accept this was not a green issue but a fundamental economic issue, the better.
When asked by interviewer Sir Dave Lewis, previously Group Chief Executive of Tesco and now chair of the UK Board of Trustees of the WWF, if there should be a mandatory net zero plan for pensions, Topping said unequivocally “yes”. Especially for local government schemes and for corporates which had committed to net zero targets as an organisation. However, if companies waited until it was mandatory, they would likely miss an opportunity. Investors would be disappointed and companies were increasingly facing pressure, particularly from their employees, to choose to take responsibility and make the right decisions now, not when they are forced to.
Event host and Isio CEO Andrew Coles said: “This discussion was about shedding light on the challenges and opportunities that climate risk and the race to zero presents for our industry. Our speakers, Sir Dave Lewis and Nigel Topping, were able to provide incredible insight and food for thought on how we can all play our part. This isn’t about compliance, or a ‘tick box’ exercise, this is about building awareness, improving knowledge and providing the best advice.”
Coles went on to lay down a challenge. “To drive real change, we need sponsors and trustees to work together on the sustainability agenda in pension schemes. Too many corporate Boards have great focus on the environmental impact of their operating business but only a passing interest in the pension trustee’s sustainability agenda. Equally, trustees are missing opportunities to access the expertise, knowledge and skills that exist in their sponsor’s business. It’s in everyone’s best interests for both the short and long term, to understand each other’s agenda, objective and philosophies to, as Nigel stated, ‘keep hope alive’ and make a difference.”