Peers are briefed on how pension funds can better consider climate & nature risks

The Pension Schemes Bill is seen by many as the most consequential piece of legislation for pensions in over 20 years with the aim of driving down costs and tackling poor returns for savers.

The Bill is now beginning its scrutiny in the House of Lords, and so yesterday we brought together sector experts in Parliament to discuss the opportunity this legislation presents to accelerate the shift of financial flows towards low-carbon and nature-positive investments.

The UK pensions system is worth around £3tn, and a majority of schemes remain exposed to fossil-fuel and high-carbon investments and rely on modelling that consistently underestimates climate and nature loss risks.

Experts representing Share Action, Finance Innovation Lab and the UK Sustainable Investment and Finance Association briefed Peers on how the Bill might be improved to support the UK's sustainable finance transition and ensure that pension funds adequately consider long-term systemic risks for current and future savers.

The session explored the benefits to the economy and savers of clarifying the legal definition of fiduciary duty, so that pension providers can consider the long-term climate impacts and risks of their investments, as well as practical steps that could support pension funds to move investment away from the most damaging fossil fuels.

As the Bill is scrutinised in the House of Lords over the coming weeks, P4P Peers will be working closely with sector experts to ensure this is not a missed opportunity to better align UK pension schemes with the Paris Agreement goals and nature targets, so that we can unlock the opportunities to protect the UK’s long-term security and economic resilience in the best interest of savers.

The Pension Schemes Bill 2nd Reading debate took place in the House of Lords on the 18 December and will being Committee Stage in the new year.