Decisions being made by pension scheme trustees are under more scrutiny than ever amid the push to net zero and campaigns such as Just Stop Oil and Make My Money Matter, according to Independent Governance Group trustee director, head of sustainability, Tegs Harding.

Speaking at a session on climate action at the Pensions and Lifetime Savings Association Investment Conference 2024, Harding said that trustees' decisions on climate issues were “receiving much more scrutiny than they ever have”.

“A really important thing for trustees is: Have you thought about it? Is your policy coherent and backed by a solid theory of change? Are you following through on the targets you set by the actions you’re taking? If you can answer yes and you can demonstrate the governance trail around that, then you are not going to be at risk of any kind of litigation from those kind of actions,” she continued.

Fellow panellist and Nest senior ESG analyst, Louis Ryall, added that there were opportunities for the industry to be bolder in terms of the actions it takes on climate.

“When it comes to fiduciaries, we need to support them a lot more, and provide them with better information and workshops,” he noted.

However, the panel agreed that institutional investors were not going to be achieving net zero by themselves, with Harding arguing that supportive long-term policy, regulation, targets at company and industry level, and company disclosures were needed to help schemes.

“Everyone needs to be pulling in the same direction to stand a chance at achieving this,” she stated.

“I think institutional investors need a platform for collaborative engagement. We can’t just go to the government and say: Can we have a transition plan please? We need to be quite clear what our asks are, they need to be timebound and specific.

“We need to be really thoughtful about the form of that engagement. It’s not for institutional investors to tell policymakers what to do. We need opportunities to all sit round a table and say: This is what needs to happen for the UK to transition.”

Universities Superannuation Scheme head of responsible investment, Sandra Carlisle, argued that effective capital allocation would be key to supporting the economy in the transition to net zero.

“One tool is capital allocation for sure, whether that’s wind, solar, renewable energy infrastructure, efficient new technologies.

“Engagement, you’ll be very familiar with that, and stewardship, by which I mean both individually at the asset level but also collectively.

“When we are doing collective engagement we need to be very clear about what we are trying to achieve. So, what is the purpose? What is the activity we are going to undertake? And what is the outcome we are seeking to achieve?”

Ryall agreed: “Voting is really important, it helps have our voices heard as asset owners. The stewardship element is really important as well, but collaboration is key.

“As big as Nest is getting, we still find a lot of value in collaborating with big investor groups. Stewardship is one way we can drive real-world decarbonisation.”

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