Despite 'significant' progress on net-zero goals, over half of pension schemes (56 per cent) think that the government should do more to help investors address climate risk, research from the Pensions and Lifetimes Savings Association (PLSA) has revealed.

In addition to this, the survey found that 53 per cent think the government could do more to remove obstacles to assist pension funds, although one in 10 (11 per cent) disagreed.

Despite this, the research revealed that six in 10 (60 per cent) UK schemes have a net-zero alignment in place, with 70 per cent stating that their scheme has made significant progress in playing its part in the transition to a net-zero society.

This was particularly true for Local Government Pension Schemes (LGPS), as 100 per cent of LGPS funds said that they had made significant progress in playing their part in the net-zero transition.

Yet, just over one in 10 (12 per cent) said that their focus on environmental, social and governance (ESG) considerations has been reduced as a result of recent economic developments, such as the cost-of-living crisis and market volatility.

Schemes that did not yet have a net-zero commitment in place primarily attributed this to the difficulties of comparing like-for-like data received from investee companies and wanting to ensure their commitment is robust.

“[We are] fully committed to net zero but wish to work with our managers to make sure any commitment is meaningful and not arbitrary or box ticking,” said one respondent, for instance.

In addition to this, over half (59 per cent) are not confident the UK will meet its climate target, and nearly three quarters (74 per cent) are concerned with recent updates which suggest there is no sustainable pathway to achieving warming of less than 2 degrees.

However, respondents suggested that there are steps that the government could take, emphasising the need for a coherent strategy on sustainable energy security and engagement with international bodies to define and standardise ESG measurement and reporting standards.

In particular, the government faced calls progress its Green Finance Strategy, progress and finalise the UK green taxonomy, and ensure climate reporting is embedded across the investment chain.

PLSA director policy and advocacy, Nigel Peaple, stated: “The pensions sector plays a key role in ensuring the world meets its commitment to minimise global temperature increases to 1.5 degrees and in leading the financial sector to this goal.

“Many pension funds have already made a commitment towards achieving net zero and we expect more will choose to do the same in the near future.

"Government has an important role to play in helping pension funds achieve their net-zero targets, by actions such as adopting a clear strategy on sustainable energy security and helping set and define meaningful standards for ESG measurement and reporting. We ask government to prioritise these actions.

“As the main representative for the UK's pension funds, we are committed to working with members to help them achieve their net-zero goals, by seeking policy change where needed, encouraging collaboration across the sector, and being at the forefront of the considerations on how the finance sector can respond to the climate emergency.”

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