The pensions sector should go "beyond" Taskforce on Climate-Related Disclosures (TCFD) reporting requirements and capture the interdependencies between climate, nature, and society, the trustees of the Legal and General (L&G) Mastertrust have said.

The call for action was made as L&G and the trustees of the L&G Mastertrust shared its Sustainability Report, which expanded the scope of the board’s TCFD reporting requirements by incorporating disclosures on nature and people.

Thought to be the first of its kind in the master trust sector, the report recognised the links climate change had with nature and biodiversity loss as well as people and society.

Covering the year up to 5 April 2024, the report detailed how climate and sustainability related risks and opportunities are considered across the L&G Mastertrust's investment decisions and risk management approach.

It also included an analysis of the actions taken by the trustees of the L&G Mastertrust, as well as L&G in its role as primary investment manager.

A key finding of the report was that, for climate, all L&G Mastertrust default funds surpassed their 2025 decarbonisation pathway plan to reduce carbon emissions, with the Target Date Funds also at, or ahead of, their 2030 goals.

In addition to this, the trustees, for the first time, tasked L&G with analysing the mastertrust’s sector-level nature-related dependencies, which initially assessed 10 “critical” sectors.

The report also said that L&G’s investment stewardship team currently maintained policies related to human rights and diversity, which apply to the L&G Mastertrust's default funds and L&G managed funds.

However, with the launch of the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) in September 2024, the trustees are reviewing the recommendations to incorporate these into future sustainability reports.

The trustees also welcomed L&G’s focus on pensions inequalities, including its work on the ethnicity pensions gap in the UK and the recent launch of a Shariah compliant investment proposition.

Commenting on the report, L&G Mastertrust investment committee chair, Tegs Harding, said: “The interdependencies between climate, nature and people are of critical importance.

“A changing climate threatens natural ecosystems, and nature loss amplifies climate change by reducing the ability of ecosystems to store carbon. These factors equally play out in the social sphere.

“Challenges such as income inequality, access to the living wage and human rights not only make it harder for us to address climate and nature issues – they exacerbate them.”

Harding said this was why L&G had incorporated the additional pillars into its first Sustainability Report, which “builds on our TCFD reporting work by recognising the ways in which climate, nature and people present financial risks and opportunities for our mastertrust members”.

“We recognise there is a lot more to do but see this as a really positive step in the right direction and would like to see others in the sector follow suit, recognising the scale of the structural challenges we face,” she stated.

Adding to this, L&G head of defined contribution, Rita Butler-Jones, said: “Good member outcomes cannot be achieved without the sustainable growth of the economy.

“We’re proud to be the first provider in the market to widen the scope of our master trust sustainability-related reporting standards, demonstrating the holistic approach we’re taking to help our clients navigate the challenges of a complex, uncertain world.”

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