The publication of the climate investment report during the PSLAs first-ever virtual Annual Conference identifies some key recommendations to overcome some of the obstacles.

Speaking to more than 80 delegates representing some 60 funds directly and many hundred more indirectly in a series of virtual roundtables over the summer, the PLSA heard that there is universal appetite among schemes and their service providers to take climate change seriously and to invest with a sense that a carbon-constrained future is coming. However, it also was told that there are a series of barriers stopping them from being able to do so.

The roundtables identified that, in some cases, there is an immature infrastructure around climate-aware investing, such as inconsistent definitions and language, as well as limited or poor quality data or lack of investment products with a full range of necessary characteristics.

Other challenges arise from limited expertise and training on climate change issues across the investment chain, including the senior decision-makers at pension schemes (most notably on trustee boards). In other cases, the issues are around structural challenges in the investment chain and the need for better alignment of duties and disclosures along it. Pension schemes cannot resolve these issues alone if they are to deliver the change that is necessary. A system-wide approach is needed.

From these discussions the following recommendations were made to overcome seven identified barriers:

• Clarifying definitions of climate-aware investment
• Addressing poor-quality climate data and information
• Delivering greater climate expertise and education
• Articulating requirements more explicitly 
• Enabling better climate stewardship
• Improving supply of appropriate climate ‘products’
• Communicating and explaining climate-aware investment

Richard Butcher, chair PLSA, said: “Climate change is a massive issue and the pensions industry has the opportunity to help mitigate its impact by investing in a climate-aware way. This report highlights some of the barriers to climate aware investing – none of which are insurmountable – and proposes some actions to overcome them.

“We’ve spent a great deal of time talking to all parts of the pension investment chain about these barriers and, while some pension schemes are already taking a proactive and leading position on the subject, there is a genuine appetite throughout to address them and do more.

“The PLSA is here to help the pensions industry overcome the barriers and to work with others in the investment chain to deliver the essential changes.”