The Government’s environmental watchdog said it was “disappointing” that the Government had not followed the example set by France to make it mandatory for large companies to report their exposure to climate change risks and opportunities.

The decision was revealed today (1 November) in the Government’s response to the Environmental Audit Committee’s (EAC) report on green finance.

Ministers have, however, accepted the Committee’s proposal to improve pension fund governance. In its report, the EAC had called on the Government to clarify in law that pension schemes have a duty to protect long-term value and consider environmental risks.

The Government will consult on a proposed change to ensure pension savers are given greater opportunities to engage with decisions as to where their money is invested. The UK’s top 25 pension funds, with assets under management worth £555bn, are failing to account for climate-related risks, according to the EAC.

EAC Chair Mary Creagh MP said: “Structural incentives across the investment chain encourage a short-term focus which tends to neglect longer-term considerations like sustainability. We are pleased that the Government and regulators are acting on our recommendations to improve how pension schemes factor climate change risks and opportunities into their decision making.

“It is disappointing that the Government has not used this opportunity to follow France in making it mandatory for large companies and asset owners to report their exposure to climate change risks and opportunities.”

Two steps forward, one step back

Momentum regarding climate-related reporting is growing following the creation – and subsequent recommendations – of the Task Force on Climate-related Financial Disclosures (TCFD), which seeks to disclose climate information as part of mainstream financial statements.

More than 500 companies have expressed support for the TCFD recommendations. But according to the TCFD 2018 Status report, many businesses are failing to translate climate impacts into business risk.

Recent research shows that 87% of assets managed by the world’s 100 largest public pension funds are yet to undergo a formal climate risk assessment, with only 15% of them adopting a coal exclusion policy.

In the UK, the Department for Work and Pensions (DWP) has admitted that there is little understanding amongst trustees on the scale of fiduciary duties that are related to climate and environmental risks. 

George Ogleby

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