XPS says the DWP ignites the blue touch paper for a behavioural shift in relation to climate change for all pension schemes, fund managers and their advisers.
XPS says the DWP ignites the blue touch paper for a behavioural shift in relation to climate change for all pension schemes, fund managers and their advisers.
29 Jan 2021
Whilst the scope of the requirement initially falls on the larger schemes, the inevitable impact of climate change will be felt by schemes of all sizes. This sentiment is echoed by the DWP bringing forward considerations for smaller schemes from 2024 to 2023. We encourage all trustee boards to put climate change on the agenda for discussion and have a plan of action on how they will manage this risk alongside capturing the opportunities created by it.
The Investment Consultants Sustainability Working Group’s framework of climate competency, was published within the DWP guidance on 27th January and outlines a range of expectations of investment consultants. The framework represents a timely first output of the working group, as trustees will look to their investment consultants to help them navigate through upcoming regulations and the complexities of the mitigating these risks within the pension scheme
Sarita Gosrani:
“Whilst all areas outlined by this framework are of high importance, I consider our role in assessing investment managers and influencing them to raise industry standards in relation to climate change to be key. They are ultimately responsible for managing the scheme assets and so are pivotal to trustees achieving their objectives on addressing climate risk.
“XPS Pensions Group’s research approach already excludes any funds that don’t meet our minimum requirements on ESG and climate change from being recommended to clients, combined with a feedback loop with managers on where they need to improve. We are encouraging our clients to be demanding on their existing managers, with annual deep dive ESG reviews to monitor improvement.
“An area where we expect to see trustees taking visible action is in replacing incumbent managers who have been given a window to address shortcomings but continue to fail to show the necessary improvement against climate targets.”