Pension scheme trustees should not lose sight of the urgency of climate change, the Trustee Sustainability Working Group (TSWG) has said, encouraging trustees not to use recent changes in international priorities as a reason to move climate issues off their agenda.

The TSWG, launched in December, also encouraged the consulting community and investment manager community to move beyond a focus on emissions to consider the financial risks inherent in a world that does not transition.

However, it suggested that innovation is needed to ensure the assets schemes are investing in, such as global index tracking funds, remain resilient.

The comments were made in response to a paper from the Institute and Faculty of Advisers (IFoA), which highlighted the urgency of action needed to prevent the climate from deteriorating even further, calling on policymakers to provide the framework for corporations and individuals to help in the restoration of the climate and nature.

Reflecting on the paper, the TSWG noted that the pension schemes are custodians of nearly £2tn of assets and acknowledged that, whilst they cannot solve the climate crisis, they can play a significant part in the solution.

However, it pointed out that the pensions industry covers both mega schemes, that have the resource to take significant actions and allocate significant resources, and smaller schemes that invest in a collective way and have very little, if any, resource to help in this area.

It also admitted that, for pension schemes, the governance burden has never been higher, with items including the pensions dashboard, the new effective system of governance (ESOG), and the new funding code taking up large amounts of trustees’ limited time.

At the same time, international views on climate have been shifting, as the US has pulled out of the Paris agreement and major asset managers have followed suit, leaving voluntary groups such as the Net Zero Asset Managers Initiative.

Despite this, the group stressed that trustees should not lose sight of the urgency of the climate problem and should seek to work, as investors, for a better planet and not use issues above to move ESG, and in particular, climate action, off their agenda.

The group also confirmed that it will “shortly” be sharing more thoughts on how trustees can prioritise their resources to continue to tackle the climate emergency during 2025. how trustees of all schemes could prioritise.

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