A quarter (25 per cent) of trustees think there should be a new interpretation of fiduciary duty to allow trustees to consider climate and other systemic risks, according to data from LCP.

Meanwhile, a further 44 per cent said that they believe considering climate risk in this way is already a route available to trustees.

The survey also found that the number of large schemes, over £5bn, which have set a net-zero target has increased from last year, possibly influenced by the Task Force on Climate-related Financial Disclosures (TCFD) reporting rules that must now be followed.

In addition to this, the survey revealed that there has been an increase in the number of smaller schemes, under £500m, which have set a target, despite there being no regulatory pressure.

Industry experts have previously suggested that changes are needed in the way fiduciary duty is being interpreted to ensure trustees can consider climate change issues, despite mixed views over the best way to go about this and whether guidance could prove enough to create change.

LCP acknowledged that currently the majority of UK pension assets are held by closed defined benefit (DB) pension schemes, many who may be considering buyout, meaning that a trustee’s primary fiduciary duty is to make their own members’ benefits secure.

It also explained that the fact that their holding in growth assets is both small and temporary means trustees may feel “limited” in their ability to influence climate change outcomes.

However, LCP argued that clarifying that fiduciary duty includes consideration of members’ best financial interests over the remainder of their lifetime so that DB trustees can, and should, legitimately consider outcomes beyond buyout would help to combat this.

LCP said that reinterpreting the duty to say that trustees should have regard to the “real-world impact” of their investment decisions, not just the impact that external factors have on their scheme’s investments, would also help to shift changes in behaviour.

Commenting on the data, LCP CEO, Aaron Punwani, said that it’s “good to see” there is an increase in schemes setting net-zero targets including small schemes that have no current requirements to do so.

However, Punwani said: “Let’s be open about the fact the current compliance-focused reporting requirements are not going to be of much help to the planet and society unless they are also accompanied by meaningful real-world action, which we believe a re-interpretation of trustee duty would drive.

“The survey results show that there is support for trustees to have a longer-term view around managing systemic climate risk and for this to be a legally safe interpretation of their duty.

“Ultimately, schemes have the power to really impact the future. Redeploying assets and effective stewardship can change the outlook for climate change, and as an industry, we need to be on the front foot when it comes to how we can best work to facilitate this and encourage a longer-term outlook.’’

Change could be seen in future, however, as Pensions Minister, Paul Maynard, recently confirmed plans for a post-implementation review of these regulations, as part of his broader plan to examine fiduciary duty.

The findings are part of LCP’s annual survey of pension scheme trustees, which will be released in full later this month.

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