Climate change is the biggest risk we collectively face and can feel like a problem that’s too big and complex to solve. We don’t know what climate change will bring in the future, but we do know there will be risks and opportunities that will impact our clients and all of us as individuals too. 

As a firm our purpose is, together with our clients, to build better futures. To achieve this, we need to make sure our advice helps our clients understand the potential impact of climate risk on their long term plans. Asset owners will inevitably be part of the solution and by embracing consideration of climate risk, they can hold others to account, invest in opportunities and help drive change.

We’ve been helping our clients do just that in a number of areas, for example:

• Setting beliefs and objectives and putting in place climate policies for asset managers and providers

• Reviewing their investment strategies to better align to their beliefs

• Understanding the practices of asset managers in addressing climate risk and helping our clients demand accountability;

• Using climate scenarios to understand how their long-term outcomes (whether that be a defined benefit scheme reaching its long term funding target or an individual saver reaching their long term saving goals) might be impacted under different climate change outcomes

But we know there is more to do. We want to ensure that climate risk is integral across all our advice rather than seen as a standalone topic. We’ve been working hard over the last year to review of all advice areas across the firm so we can ensure we meet that ambition.

We’re continuing to develop advice and services to help clients understand and manage climate risk effectively and help our larger pension scheme clients get ready for mandatory TCFD reporting (see here for more detail on this). We’ve also been working to develop the tools that we use to advise our clients, improving the data and metrics against which we can assess strategies and enhancing our scenario modelling. We’re keen to ensure that we can help our clients address this issue, regardless of how we work with them.

One of the few silver linings of the COVID-19 pandemic and the resulting rapid development of vaccines within a year has been the demonstration that collective action and significant investment in research can solve even the most difficult problems. This offers some hope for the fight against climate change (a sentiment you’ll have heard echoed by David Attenborough if you’ve had a chance to watch his latest series) and asset owners like pension schemes have a key role to play in this to help secure a better future for their members and the next generations.

If you want some more information on practical steps you can take as a pension scheme decision maker, we’ve published defined contribution and defined benefit scheme guides.