By Paul Williams & Elizabeth Harker

Speaking at the United Nations Climate Change Conference (“COP26”) in October 2021, the UK Secretary of State for Work and Pensions, Thérèse Coffey, said that pension schemes can become a “superpower” in fighting climate change and propelling the world to net zero. But to what extent does the legal landscape within which pension schemes operate allow them to perform this role, and indeed to what extent should they be performing this role?

Here in the UK, we have seen a recent influx of legislation which has cemented ESG and, specifically, climate change as factors which pension schemes must incorporate into their investment strategy and which has introduced stewardship and ESG and climate–related reporting obligations. This led us to wonder whether similar legislation exists in other major pensions jurisdictions. Our findings are set out in this article, which is a high-level comparative analysis of the extent to which the law in the UK, the US, the Netherlands, Australia and Canada1 promotes, or even permits, pension schemes investment by pension schemes in a way which takes account of ESG factors. We focus on the laws and non-binding codes and guidance relating to the selection of investments, stewardship and reporting.

The focus of this article is on the law as it relates to pension schemes and their trustees or equivalent governing bodies. There are many other stakeholders involved in the investment process, notably investment managers and financial product providers, which may be subject to separate obligations. The obligations in respect of these other stakeholders are outside the scope of this article.

Source: Baker McKenzie