Pensions Trust boosts responsible investment credentials with climate policy

A leading third sector pension fund is launching a review of its investment portfolio in order to understand where there might be “value at risk” – particularly from climate change.

The Pensions Trust, which provides workplace pensions for not-for-profit organisations such as charities and voluntary groups, launched the review after a survey by the Asset Owners Disclosure Project (AODP).

Released in December, it accused the majority of investment funds of failing to manage climate risks properly. The AODP said this subsequently exposed investors to potentially huge losses in the future.

Of 460 investment funds, only 27 were said to be currently considering climate risk. Just five were rated AAA (very good) with 80% rated D or X, meaning they do very little or nothing on this front. The Pensions Trust was awarded an A rating.

It said its recently adopted climate change policy will help ensure risk is considered within its investment processes, whilst mitigating the impact of climate change.

It described its AODP rating as “thrilling”, adding that its climate change policy reflects its commitment to realising the potential impacts of climate change.

Chief executive Stephen Nichols said, “The potential impact of climate change is a key focus area for the Trust and this achievement recognises the work being undertaken to ensure that regulatory risks from climate change are considered in investment decisions, and further reinforces the Trust’s commitment to being a responsible investor.”

The Pensions Trust has around £5.7 billion worth of assets and serves over 2,400 organisations, with more than 170,000 members and pensioners.

The climate change policy will see it engage with policymakers and the wider investment community on how to best manage climate risks.

It has joined the Institutional Investors Group on Climate Change (IIGCC) – a coalition of European investors worth €7.5 trillion (£6.2 trillion) – and updated both its Statement of Investment Principles and its Voting and Engagement Policy to reflect its renewed stance.

Further reading:

Majority of investors unaware of ‘foolhardy addiction’ to climate risks

Climate change a ‘firmly established’ material risk for mainstream investors

Pension headache: why we need our funds to go on a fossil fuel diet

Pensions minister: investors who see climate risks have ‘competitive advantage’

The Guide to Climate Change 2013