The whole pensions sector must collaborate if it is going to drive real change on climate issues, industry experts have warned.
Speaking today (12 October) at the Pensions and Lifetime Savings Association's (PLSA) virtual conference, Nest head of responsible investment Diandra Soobiah explained how the industry as a whole has a "social responsibility" to act on climate change, and added "the moral issue of protecting the planet goes hand in hand with protecting members".
During the panel discussion - which looked at the ‘golden rules' of stewardship - Church of England Pension Board director of ethics and engagement Adam Matthews said there is no point helping savers retire into "a world ravaged by climate change".
Soobiah said: "Members are concerned about the issues around climate change. The issue financially impacts them, but also resonates directly."
She continued: "We can't strive for perfection and be brilliant at everything but we can focus on the issues that will affect our members in the long term."
Matthews argued: "No fund itself is going to drive change in the time we have so we need to collaborate", adding that to drive genuine systemic change, the whole pensions sector needs to act.
During the discussion, he added: "Climate change is a clear financial risk that needs understanding and managing. There are also opportunities. If a manager is not addressing this then they pose a risk for us."
Soobiah said: "Collaborating with other investors and working with fund managers has been instrumental to our approach; pushing them to do better, ensuring they're voting in terms of long-term interests of clients, ensuring they have strong stewardship approaches in place to make positive impacts across the market."
She also noted: "We lose the conversation if we take voting rights away… Engaging with policy makers is important to achieve impact and we should be encouraging fund managers to take part in consultations. We've seen over the years our viewpoints are being factored into their policies and consultation responses."
"It's important that fund managers have their own documented views on stewardship but they should engage with their clients and listen to their views too. They cannot develop stewardship policies without the long-term interest of their clients at the heart of them. Engagement must be ongoing and they should make the effort to hear the views of even their smallest clients and they should be proactive about it," she continued.
Matthews said: "You've got a responsibility to steward your assets. The challenge is dependent on your size and you have got to understand the value your fund has. You need to have dialogue with your managers and need to manage financial risk as well as opportunity," and added the industry must "drive change in line with our best understanding of the science and economics behind climate change".
Discussing how managers can reconcile their various clients' views, Matthews said: "Clearly when serving many clients a manager is going to need to find ways to be as responsive as possible but equally attempt to find the common ground that enables them to deliver at scale.
"I would argue that on issues like climate change that there are some quite central requirements to be managed that are common to all. Those risks are also very helpfully now quite explicit in initiatives like Climate Action 100+ which stipulate the kind of expectations of companies and the issues you as a manger should be engaging on/voting on. If a manger is not addressing the risk of climate to our investments then they are failing us in our expectations and responsibilities to our beneficiaries."
He revealed while it is harder for smaller funds to be heard, "you have every right to challenge and expect, and you should also challenge your advisers to work with you to this end as well as they are critical to this".
In the wake of the coronavirus pandemic, Soobiah said: "The government's agenda to ‘build back better' will force companies to consider how they can become much more sustainable. There has been a shift in consumer attitude and a whole generation are waking up to the need to become more sustainable. All companies can think about becoming more sustainable."
This comes after the Financial Reporting Council last month revealed asset owners and investors had made "good attempts" at reporting against the principles of the UK Stewardship Code 2020, which took effect from 1 January this year.
Birthday honours have been awarded to pensions industry giants Mark Boyle and Sara Protheroe in recognition of their “outstanding achievements”.
In this week's Pensions Buzz, we want to know whether you agree with AJ Bell's call for the introduction of a minister for scam prevention.
London Borough of Hammersmith and Fulham to transfer pensions administration services following review
The London Borough of Hammersmith and Fulham is looking to transfer its pensions administration service to a new provider towards the end of 2021, following an independent review.
Consolidation across defined benefit (DB) and defined contribution (DC) schemes is the most-anticipated trend for the UK pensions industry over the next five years, the Pensions and Lifetime Savings Association (PLSA) has found.
Brexit remains a key area of concern for pension schemes as discussions over a potential trade deal with the EU continue to intensify, according to a PP poll.