PP Live: Cut down on box ticking when it comes to sustainability

Speaking during a panel discussion this morning (19 May) at Professional Pensions Live in London, Accounting for Sustainability executive director of capital markets Kerry King highlighted the need for a "more tailored approach rather than box-ticking exercises", adding this will "really help outcomes".

She added trustees need to ask what decisions actually mean, noting: "Every scheme needs to be aware of misalignment between scenarios and modelling."

Also speaking on the panel, Independent Governance Group trustee director and head of policy and external affairs Louise Davey said trustees must "really focus on governance and ask the right questions to managers and be thorough and document approaches".

She said most trustees accept climate change will affect the economy, and therefore portfolios, but warned what is not always looked at is who this is financially detrimental to. She said there is "a gap in how to deal with that".

She urged schemes to "be specific" about why they are or are not taking certain actions, as well as document governance and ensure it is "robust".

Davey added defined benefit considerations are different to defined contribution (DC) because there is "more scope in DC to think more creatively". She added DC is also where greater scale is seen, "which brings more options".

She added there are "challenges and different questions [to be asked] depending on demographics of schemes".

King noted pension funds "have a significant role in ensuring their providers are aligning to the mandate and ensuring decisions they make are aligning to the long-term objectives" of the scheme.

The Taskforce on Climate-related Financial Disclosures (TCFD) project has been discussed recently, with PP this week asking whether the reporting requirements should be phased out.

King argued TCFD has been given a "bad rap". She suggested some "unintended consequences" have come out of the project but said it "was a game changer in getting climate risk as a financial risk recognised".

Davey suggested that while the structure of TCFD has not necessarily been an issue, progress in the area has more so "been driven by technology rather than policy". She suggested change has happened because "things have got cheaper rather than policy change".

Davey added the industry needs to do more planning around supply and distribution risks, adding voting and engagement "needs to reflect real world change".