A recent report by PwC found that the UK will need to increase infrastructure spending to GBP40 billion a year, double the current level, in order to reach its target of net zero by 2050.

“In the UK, investment in infrastructure by long-term investors is minuscule,” said Nick Silver, co-founder of the Climate Bonds Initiative, at the World Pensions Council event.

Pension funds allocate on a risk-return basis, and have historically shown a strong preference for liquidity – leading many to invest in highly liquid government bonds rather than more illiquid infrastructure projects. Silver said that many of these investments are “not suitable” given the real time horizon of many pension funds.

“Even if the pension is large, it’s still a relatively small fraction of the overall size of the liabilities,” he said. “Most of it is effectively funded by contributors and future contributors, and the actual valuation has a 75-year time horizon.”

Pension funds should invest in the long-term sustainability of the economy in order to preserve these future contributions, said Silver. “The pension system as a whole has to invest in a way that in the long term will pay back its pension.

For the regulator and for the government, the purpose of the pension system is to ensure that the assets are managed to generate long-term sustainable returns.”

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