Three quarters (75 per cent) of schemes have adopted net-zero targets, with more schemes than ever taking action to address climate risks, XPS analysis has revealed.

The firm published a new analysis of 48 pension schemes' task force on climate-related financial disclosure (TCFD) reports to review climate change risk management and reporting approaches.

This showed that three-quarters of schemes have adopted net zero targets, up from 60 per cent last year.

Of these, 75 per cent have indicated clear plans aligned to best practice, suggesting that scheme uptake and credibility have improved.

Additionally, 69 per cent have made asset allocation changes to address climate risks, a significant increase from previous years.

According to XPS, this suggests that climate risk analysis is driving changing investment decisions, with 42 percent of all schemes reviewed indicating at least some direct investment in climate solutions.

XPS said it expects this number to grow as the opportunities and availability of low-carbon solutions increase over time.

Meanwhile, the average implied temperature rise of the schemes reported was 2.4°C.

This is lower than the average reported last year (2.80C) and the latest scientific estimates of global progress (2.7°C) but above the Paris Agreement goal of keeping global warming at least below 2°C, suggesting schemes were holding assets at risk of value deterioration as the transition accelerates.

XPS Pensions ESG research head, Alex Quant, said the findings highlighted “significant strides” pension schemes were making towards net zero targets.

“It’s good to see more pension schemes having clear, actionable plans focussing on forward-looking alignment to the climate transition,” he continued.

“Given the recent significant setbacks for the low carbon transition at the government and industry level, we urge trustees to understand the risks and opportunities they are exposed to fully.”

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