Pensions watch – Issue 7: What’s been happening and what’s on the horizon in the world of pensions

¹See: https://www.parisalignedinvestment.org/media/2021/03/PAII-Net-Zero-Investment-Framework_Implementation-Guide.pdf
²TPR’s climate change strategy was published on 7 April 2021. See: https://www.thepensionsregulator.gov.uk/en/document-library/strategy-and-policy/climate-change-strategy
³The DWP will determine in 2H23 whether the requirements should be extended to sub-£1bntrust-based schemes from 2024/25.
⁴Such as a portfolio alignment metric or a climate value at risk measure.
⁵The reporting should separate the Scope 1 and 2 emissions of scheme assets from Scope 3. As to what Scopes 1,2 and 3 comprise, see: There is no Planet B: Why climate change risk management is the world’s hottest topic and
how asset owners and asset managers should be responding. Chris Wagstaff. Columbia Threadneedle Investments. June 2020. p.18 and pp.29-30.
⁶More specifically, the TCFD disclosure framework requires action under four headings: Governance (identifying and managing risks and opportunities), Strategy (assessing the impact of these risks and opportunities on short and
long term business strategy), Risk management (enhancing risk management to capture these risks) and Metrics and targets (understanding these in the assessment and management of climate risks).
⁷For example, on or before 1 October 2021, all trust-based pension schemes with 100 or more members must set out, within their statement of investment principles (SIP), their policy on financially material climate risks pertaining
to their scheme, publishing this with their implementation statement (which discloses the extent to which the Trustees have followed the objectives and policies set out in their SIP) on a publicly accessible website.
⁸See: https://www.thepensionsregulator.gov.uk/en/document-library/strategy-and-policy/climate-change-strategy
⁹Thinking Ahead Institute. Global Pension Assets Study 2020. WTW. December 2020. p.13. US$3.45tn converted at the USD:GBP exchange rate of 0.72.
¹⁰Coming into force in November 2016, following ratification by 146 countries, the Paris Agreement’s central aim has been to strengthen the global response to the threat of climate change by keeping the global temperature rise
this century well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5°C.
¹¹The Net Zero Investment Framework started life in May 2019, with the backing of 110 institutional investors representing US$33tn in assets, as the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment
Initiative (PAII). By March 2021, the initiative had grown into a global collaboration supported by four regional investor networks [Asia Investor Group on Climate Change (AIGCC) – Asia; Ceres – North America; Investor Group on
Climate Change (IGCC) – Australasia; Institutional Investors Group on Climate Change (IIGCC) – Europe] all of whom engaged in the development of, what has now become, The Net Zero Investment Framework 1.0.
¹²See: https://ukcop26.org/
¹³For instance, if government policies were to align with limiting the post-industrial increase in global temperatures to 1.5°C, then a whopping 84% of remaining fossil fuels would need to be left in the ground, resulting in an
estimated US$900bn of coal, oil and gas assets becoming stranded. See: There is no Planet B (June 2020). op.cit.p.14.