The majority (65 per cent) of pension funds have a commitment to net zero in place, while 22 per cent of the third who do not have one expect to adopt a commitment within five years, research from the Pensions and Lifetime Savings Association (PLSA) has found.

The research also found that among the schemes with a net-zero commitment, nearly a quarter (23 per cent) aim to achieve net zero by 2040, while a majority (44 per cent) expect to reach this target between 2040 and 2050.

However, the survey highlighted several “critical” challenges hindering progress despite these ambitions, including the lack of high-quality data (59 per cent) and uncertainty regarding future government policies (55 per cent).

In addition to this, a third of respondents cited regulatory uncertainty and limited investment opportunities in low-carbon assets (35 per cent) as further obstacles.

Despite this, the research showed that organisations were actively implementing strategies to meet their climate objectives, with 90 per cent of those with a net-zero commitment engaging with companies to reduce emissions.

Meanwhile, 80 per cent of respondents said they were investing in renewable energy, 53 per cent were enhancing energy efficiency in real estate investments and 41 per cent were divesting from high-carbon assets.

In addition to this, over three quarters (76 per cent) of respondents supported the development and implementation of credible transition plans aligned with the 1.5°C target set by the Paris Agreement.  

PLSA deputy director of policy, Joe Dabrowski, said having tracked the progress of its members, it was “promising” to see the commitment towards achieving net zero remained, with more organisations moving from intent to implementation of their plans. 

“However, as investors and the economy work more widely towards a net-zero future, the survey underscores the need for greater clarity, improved data, and stronger government support to overcome the challenges ahead,” he added.

The PLSA also added that while progress on climate-related goals was advancing, more attention was placed on biodiversity and nature-related issues.  

Indeed, pension funds’ knowledge of Taskforce on Nature-related Financial Disclosures (TNFD) recommendations remained limited as only 17 per cent of respondents reported a “strong familiarity” with its recommendations. 

The PLSA argued that this gap highlighted the importance of frameworks like the Kunming-Montreal Global Biodiversity Framework and TNFD, which aim to address these challenges.

In addition to this, the research showed several challenges in implementing TNFD recommendations and addressing biodiversity more broadly, including setting measurable biodiversity targets (77 per cent) and navigating the complexity of identifying and assessing biodiversity-related risks (68 per cent). 

Despite this, 73 per cent of organisations who plan to adopt TNFD recommendations aim to do so in the next five years, suggesting a “strong” long-term commitment to addressing biodiversity and nature-related risks. 

Dabrowski said that action on biodiversity lags behind climate efforts, although frameworks such as TNFD aim to “bridge this gap”.

Given this, the PLSA created a guide, Nature’s Impact – Why Biodiversity Loss Matters to Pension Schemes and What to Do About It, to enhance pension schemes' understanding of this area.

The guide is designed to explain the interconnected but distinct concepts of nature and biodiversity, highlighting the financial and environmental risks posed by biodiversity loss.

The PLSA said that these risks impact pension schemes through cost implications and the long-term financial wellbeing of pension scheme members. 

The guide outlined five steps for pension schemes including the importance of engaging with training opportunities, engagement and stewardship, the need to conduct portfolio assessments, engaging with the range of nature-based investment opportunities available, and considering policy advocacy and target-setting exercises.

It also addressed overlaps with the Taskforce for Climate-related Financial Disclosures (TCFD) and provided ways to include climate and nature reporting without increasing administrative burden.

Dabrowski added that the PLSA guide highlighted practical steps, case studies, and links to climate reporting and urged members to proactively address biodiversity to safeguard long-term financial and ecological stability.

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