A UK government minister has warned the multitrillion-pound asset management industry that it can no longer put off requests from pension trustees for information about the climate risks of the companies they invest in.
Addressing an industry conference this week, Guy Opperman, pensions minister, said the climate data provided to trustees “needs to get better”.
Opperman made the comments as wide-ranging reforms, introduced as part of the government’s decarbonisation agenda, came into force, placing new climate reporting and disclosure duties on pension trustees.
“Asset managers across all markets, public, private, debt and equity cannot just say they do not have the perfect information or ask clients to wait another five years,” Opperman told the Pensions and Lifetime Savings Association conference.
“They need to start spending their resources and their modelling capabilities — which are genuinely very good — to measure and then report on the quantitative tilt of the products they sell.”
Asset managers have been criticised recently by a regulatory task force over gaps in the information they provide about the climate risks of their funds.
Despite record inflows to funds that invest according to environmental, social and governance principles — taking their assets under management above $1tn this year — the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) has found “reporting to their clients . . . is likely insufficient”.
The Investment Association, which represents asset managers, said its members supported the climate risk governance requirements for pension schemes. “Pension funds need high quality, meaningful and comparable information from their investment managers, who in turn need quality information from investee companies about the climate risks they face,” the IA said.
“Our industry has called for all listed companies to report on the risks of climate change to their business using the TCFD framework and will be stepping up the pressure in this year’s AGM season to see that disclosures improve. We have also asked large private companies to report in line with this framework,” it added.
The TCFD in November published its road map outlining steps the UK government and regulators will need to take as they roll out mandatory climate reporting requirements.
Under this road map, by 2023 the vast majority of assets invested with pension scheme trustees, asset managers and insurers which are disclosing climate-related financial risks and opportunities will need to do so in line with recommendations by the TCFD.
Trustees of schemes with more than £5bn in assets will from October this year face additional duties to identify, and assess the impact of, climate-related risks and opportunities that will have an effect on the scheme’s investment strategy.
“With almost £2tn in assets under management, all pension schemes are exposed to climate-related risks and I am committed to ensuring trustees do everything they can to limit this risk to their members’ future retirement income,” said Opperman.
Additional reporting Attracta Mooney