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On Friday the Department for Work and Pensions announced its intention to require large pension funds to disclose their portfolio alignment with the Paris Agreement from 1 October this year.
Sandy Trust, chair of the IFoA sustainability board, said the IFoA recognises the role that pension schemes play in facilitating the net zero transition, both through funding climate solutions and supporting companies to transition.
Even if data is not perfect, he said schemes and trustees need to recognise that “climate alignment calculations are just projections” and therefore need to be used appropriately by users.
“We recognise that climate data, methodologies and assumptions are moving quickly. While these may be imperfect today, standards are rising rapidly and significant effort is being put into improving these aspects, for example, the Glasgow Financial Alliance for Net Zero’s work on portfolio alignment,” he added.
Trust also said actuaries, as key advisers to pension schemes, have an important role to play in facilitating the transition to net zero: “Actuaries specialise in risk management and climate change is one of the greatest risks facing our world today.”
The Financial Reporting Council is considering introducing a requirement for actuaries to take climate change into account in their work.
The IFoA said it is working to ensure actuaries have the necessary understanding and skills; it has developed a series of practical guides to help actuaries appropriately include sustainability matters into their work and has launched a new Climate Risk and Sustainability Course, alongside a series of thought leadership webinars on the topic.
TPR welcomes new climate rules
David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said the regulator welcomes the government’s requirements for the largest pension schemes to clearly communicate to members how far their investments align with international efforts to limit global temperature rises.
Fairs said: “Climate change poses a potential risk to the pension pots of all savers. These requirements should see the trustees of more schemes recognising those risks and explain their progress in addressing them to savers.”
Do you think all stakeholders in the pensions industry are working hard to align with the Paris agreement?