Defined benefit (DB) pension schemes must avoid treating climate transition plans as a tick-box exercise, to avoid increasing investment risk and undermining long-term returns, Hymans Robertson has warned.

In a blog post, the consultancy argued that trustees should instead ensure that climate transition planning is clearly aligned with fiduciary duty, enabling schemes to take a long-term view of climate-related risks and to set out practical actions to address them, regardless of regulatory uncertainty or external pressures.

Hymans Robertson stressed that climate transition plans are most effective when they focus on identifying, prioritising and adapting to climate-related risks.

In this context, it said trustees should ensure plans address four core areas: portfolio emissions, asset alignment, stewardship and climate solutions.

A well-developed transition plan, the blog read, can provide schemes with greater flexibility over time, allowing for broader and more integrated sustainability reporting, including closer consideration of nature-related risks and opportunities.

Early adoption could also open access to more predictable sources of sustainable revenue while reducing future reporting burdens.

When implemented effectively, the consultancy added, climate transition plans can support the seamless integration of sustainability considerations into investment decision-making and enable schemes to demonstrate leadership in sustainable finance.

Hymans Robertson investment consultant, Mhairi Gooch, claimed climate transition plans should sit at the heart of sustainable investment strategies rather than being viewed as optional, stressing that they should be "central" to clients’ sustainability strategies.

"Climate transition risks are more complex today, and traditional measures of emissions are no longer telling the full story", she continued, warning that physical risks are already being felt and are likely to increase in both severity and frequency.

“Climate transition plans should help schemes identify and prioritise the range of risks that climate and nature present, supporting greater resilience in investment strategies.

"They must now be seen as a strategic imperative rather than a ‘nice to have’.”

Gooch also cautioned against delaying action in the hope of greater policy clarity, warning that fragmented and stalling climate policy could leave schemes exposed.

“With climate policy increasingly uncertain, waiting for regulatory certainty can mean missing opportunities while leaving static strategies overexposed to risk,” she added.

“Well-designed plans can be tailored to manage this uncertainty, and asset owners should act now if they want to maximise long-term market opportunities.”

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