The proportion of pension schemes seeking greater alignment or integration of sustainable investment beyond employer policies doubled from 20 per cent in 2021 to 40 per cent in 2022, analysis from Mercer has revealed.

The group’s latest Responsible Investment Total Evaluation (Rite) report, which benchmarks around 1,000 schemes from across the defined benefit (DB) and defined contribution (DC) space, showed that schemes have made “significant improvements” in their sustainable investment credentials.

In particular, the research found that 50 per cent of schemes undertook a sustainable investment beliefs survey or workshop in the past three years, up from 32 per cent in 2021, while 30 per cent of schemes include sustainable or low carbon assets in their portfolio, up from 22 per cent in 2021.

Improvements have also been seen in scheme processes, as the research found that 85 per cent of schemes have carried out a sustainable investment fund ratings assessment to benchmark the ratings of the funds held in their portfolios against the wider universe of funds, up from 80 per cent in 2021.

The proportion of schemes conducting carbon footprint analysis and/or assessed other climate-related metrics also grew from 14 per cent in 2021 to 20 per cent in 2022.

However, Mercer argued that there is still more to be done, with the research revealing that not all schemes have made material improvements, as some have delayed action to consider long-term options, and others have been “understandably” distracted by short-term pressures caused by volatile markets.

Mercer head of sustainable investment UK, Europe and IMETA, Brian Henderson, stated: “While the Rite report shows pension schemes in both DB and DC funds are making significant progress in sustainable investing, there is still more to be done.

“Despite these welcome advancements not all schemes have made material improvements. Some have delayed action while considering longer term options, while others may be focused on short term caused by volatile markets.

“Rite’s data indicates that more schemes will aim to address sustainable investment processes and prioritise the further integration of sustainable investment into their portfolios in the coming year.”

In particular, Mercer predicted an increase in those schemes regularly monitoring climate-change metrics, building on the increase recorded over the last 12 months, as well as a greater emphasis on stewardship of assets, in line with the UK statutory guidance.

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