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Climate risks data gaps facing pension schemes

by Cass
18th Oct 21 8:40 am

CACEIS, the sustainable governance partner of choice for UK Pension Schemes, hosted the webinar on climate risk at the Pensions & Lifetime Savings (PLSA) Annual conference highlighting that four in five (79%) pension schemes say climate risk is high on their agenda but gaps in perception of climate impacts still exist, with 70% of pension schemes citing that climate risks poses a medium or low impact to investments*.

Pat Sharman, Country Managing Director, UK, CACEIS commented, “COP26 is focussing world leaders thought on climate risk. We heard from one of the panel members on our webinar that there are $18trn in global equities, $8trn in bonds and $30trn unlisted debt linked to high emissions sectors of the economy.

“For pension schemes developing an independent viewpoint of exposure to climate risks is key for governance and creates a strong framework so trustees can confidently take action on these risks.”

The speakers at CACEIS’s webinar at the PLSA event included Chandra Gopinathan, Railpen and climate specialist Ralf Toumi of Grantham Research Institute on Climate Change & the Environment, discussing the key role the UK pensions market has to play in driving change.

Pensions schemes have to understand the physical risks, resulting directly from climate changes versus the transition risk resulting from mitigation challenges as societies decarbonise – this can include policy risks, where regulations force change to lower carbon emissions; preference risk where consumer behaviour changes and favours lower carbon, through to technological disruption.

The panel talked about the importance of understanding exposure to climate risks through a pension scheme’s investment in equities and bonds. Schemes need to determine what that risk looks like at a sector and individual security level to understand a scheme’s emissions footprint and understand what the forward trajectory is like in emissions.

However new CACEIS research highlights that 69% of pensions schemes say they need access to better data to measure climate risks from their schemes investments and over half (57%) say they struggle with the lack of consistent data and unable to make comparisons.

The panel highlighted that information is not perfect, but pension schemes and trustees now have a large pool of resources to begin collating more insight into the only issue of our time – climate change.

Pat Sharman, Country Managing Director, UK, CACEIS continued, “The lack of accessible governance solutions in the industry has been a longstanding issue for pension schemes. Data is improving and schemes can take action now to use the resources available to map out their climate risk frameworks.”

Pat Sharman, Country Managing Director, UK, CACEIS continued, “The UK pensions market is the third largest in the world, overseeing over £2.5 trillion of assets investing in a lot of companies. Pension schemes are therefore in a unique position to help drive change through active dialogue with their asset managers, but many are struggling and as an industry we need to find better solutions. “

CACEIS is working with pensions schemes to create quality data solutions allow them to measure and monitor the carbon emissions from their underlying pooled fund and segregated investments.

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