The Chair of the cross-party Environmental Audit Committee (EAC) has written to the UK’s top 25 pension funds to ask how they manage the risks posed to pension savings by climate change.
Mary Creagh MP launched the line of questioning after the Department for Work and Pensions admitted there is widespread misunderstanding amongst pension trustees on the scope of their legal and ethical duties in relation to environmental risks.
The pension funds in question include the Universities Superannuation Scheme, BT’s Pension Scheme and the RBS Group Pension Fund.
Ms Creagh said: “The climate change risks of tomorrow should be considered by pension funds today. A young person auto-enrolled on a pension today may be 45 years away from retirement.
“Over that timescale these climate change risks will inevitably grow. We are examining whether pension funds are starting to take these risks into account in their financial decision making.”
Evidence from the Department of Work and Pensions and the Bank of England said despite pension fund trustees having a fiduciary duty to act in the best interests of their beneficiaries, this is sometimes misinterpreted as a duty to maximise short term returns.
They suggested this can lead to the neglect of longer term considerations, such as environmental sustainability and climate change-related risks and opportunities.