The Environmental Audit Committee (EAC) has called on the government to make it mandatory for large companies and asset owners to report their exposure to climate change risks and opportunities by 2022.
The group of MPs say organisations such as pension funds should have a legal duty to protect long-term value and must consider environmental risks in light of this.
It suggests structural incentives across the UK investment chain encourage a focus on short-term returns, often to the neglect of longer-term considerations such as sustainability.
The EAC adds pension savers themselves should be given greater opportunities to engage with decisions about where their money is invested and says fund should have to actively seek the views of their beneficiaries when producing Statements of Investment Principles (SIPS).
The Committee do not believe a voluntary approach on climate disclosure will be effective in the medium-term.
Mary Creagh MP, Chair of the EAC, said: “Climate change poses financial risks to a range of investments – from food and farming, to infrastructure, construction and insurance liability.
“We want to see mandatory climate risk reporting and a clarification in law that pension trustees have a duty to consider long term sustainability, not just short-term returns.”
A government spokesperson said: “The UK is a world leader in green finance and since 1990 we have slashed emissions by over 40% while growing our economy by over two-thirds.
“Every part of society has a part to play in tackling climate change, including business. We’ll consider the findings of this report alongside our review of the Green Finance Taskforce’s proposals to encourage companies to put greater emphasis on environmental considerations when making decisions.”