29 Jun 2021

Aligning pension funds and corporate climate ambitions

Insights from a panel discussion on 29 June 2021, co-hosted by the Centre for Climate Engagement and Chapter Zero as part of London Climate Action Week.

Where pension funds are invested is an increasing concern for businesses, employees and their stakeholders. This event explored how pension schemes can align with a business’s climate goals. It considered the climate risk governance requirements under the Pension Schemes Act 2021, the barriers and enablers to action, and how non-executive directors (NEDs) and pension trustees can work together to align pension funds with corporate climate ambitions.


Russell Picot

Chair of the Trustee board of the HSBC Bank (UK) Pension Fund; Trustee Board Director, Universities Superannuation Scheme (USS)

Bethan Livesey

Director of Policy at ShareAction

Mark Austin

Chair of UK Northern Trust Pension Scheme

Robert Jennings

Chair of Sequoia Economic Infrastructure Income Fund
Moderated by:

Emily Farnworth

Co-Director at the Centre for Climate Engagement, Hughes Hall, University of Cambridge

Top takeaways

  1. Engagement between pension trustees, members and sponsor organisations can ensure that climate measures and action pursued by trustees represent the interest of members. Equally, businesses collaborating with trustees can help to align the climate governance strategy of pension schemes and corporate climate ambitions.
  2. Education is essential for raising awareness and taking action. For NEDs and their businesses to work effectively with pension trustees, it is useful to understand the challenges and processes that pension trustees face. It is also important that pension trustees and industry practitioners, including investment consultants, expand their knowledge of climate risk governance; understanding both why they need to act, and how to take action.
  3. Scrutinising, understanding and challenging climate commitments within the pension portfolio is vital to ensuring credibility and impact. While there is no official body for this, there is a potential role for non-governmental organisations (NGOs) and industry bodies to independently review and assess these commitments and suggest ways in which they might be strengthened and improved. These assessments will also help sponsor organisations to better understand their pension fund’s climate commitments.


What can NEDs do to raise this topic in the boardroom?

It can be challenging for NEDs to understand how a company’s pension scheme aligns with its own corporate climate ambitions. Having a good open relationship between pension trustees and corporate sponsors is important to achieving alignment on climate ambition.

For all pension schemes, the trustee must consult periodically with its fund’s sponsors on investment strategy. The interaction between a sponsor organisation and its pension trustees is usually managed by a member of the senior executive team, typically the finance director, but sometimes the chief risk officer or head of human resources.

This presents an opportunity for NEDs to request that the finance director, or appropriate senior executive, report to the board on how their investment strategy addresses climate change, including how the corporate pension scheme aligns with that strategy.

A board-level strategy which aims for net zero milestones cannot afford to completely ignore what’s happening with their own pension schemes.

Robert Jennings, Chair of Sequoia Economic Infrastructure Income Fund

Working with pension trustees and the wider picture

For NEDs and their businesses to work effectively with pension trustees, it is useful to understand the climate governance challenges and processes that pension trustees face.

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