MPs tell govt to use COP26 to push green pension schemes

The COP26 climate conference provides a major opportunity for the UK to push an international consensus on the role of pension schemes in achieving the goals of the Paris Agreement and to push towards global harmonisation of climate-related financial disclosures, MPs said today.

The work and pensions committee has called on the government to show global leadership on pensions and climate change ahead of the UN conference in Glasgow this November. In a report published today, the committee makes recommendations on reporting standards, pension scheme governance and investment and stewardship.

Harmonising climate-related reporting standards would considerably reduce the burden and costs to pension schemes given the global nature of assets and investments, the report says, but the committee adds that work towards this must not be a barrier to the UK rapidly implementing its own high standards.

On investment and stewardship, the committee has welcomed the government’s stance that divestment – the process of selling assets already held – to reduce pension schemes’ contribution to climate change should be a last resort. Encouraging behavioural change in companies through good stewardship is more likely to be an effective approach to help the real economy transition to net zero, the report concludes.

Stephen Timms MP, Chair of the Work and Pensions Committee, said: “With pension investments unrestrained by borders, international agreement is going to be key if the potential for pension schemes to contribute to cutting carbon emissions is to be realised. Hosting COP26 provides the UK with a unique opportunity to build an international consensus on reporting standards and stewardship and the Government must seize it with both hands.

“Pension schemes can play a major role in helping the real economy transition to net-zero but encouraging companies to become more sustainable through good and effective stewardship should always be the first step before moves to sell off assets that are unable to reduce their contribution to climate change. The Government needs to ensure that its policies do not incentivise divestment over good stewardship of schemes.”