The Pensions Regulator (TPR) has rejected a request to publish guidance for Local Government Pension Scheme funds on minimising the risk from fossil fuel investments.
Earlier this year, campaign charity ShareAction submitted a referral to TPR raising concerns over the way many LGPS funds deal with risks associated with climate change.
It said that the regulator should take action to educate funds that climate change investments pose a financial risk and is not only an ethical investment issue.
In its response, TPR said that it was sympathetic to the issues raised in the referral, “and recognize climate risk as an ESG factor that may be financially significant, and accordingly should be considered when determining investment strategy, consistent with guidance from the Law Commission, Department for Communities and Local Government and TPR.”
It also agreed with ShareAction that LGPS funds should not assume they can delegate responsibility for fossil fuel investments to advisers.
But it added that it “needs to consider the broader context of governance (including investment governance) rather than address a specific issue — we have a programme of work around governance which aims to build up governance standards from the ground up, and we need to deliver this work as a priority.”
It said that it would continue to state its public position on climate risk through speaking events, and would consider blogging about the issue.
Rachel Haworth, policy officer at ShareAction, said: “We recognise the significant challenges TPR faces in bringing broader trustee skills and governance up to the necessary standards, and welcome their work in this area.
“However, the urgency of climate risk is such that members need the regulator to act quickly to mitigate against risks to their savings.
“We hope that TPR will continue to focus on this area, and take strong action to address the misconceptions we have raised.”
It is understood that a number of LGPS administering authorities have written to the TPR requesting a meeting to discuss the contents of the referral.
The councils concerned are East Riding Pension Fund, Hampshire Pension Fund, Leicestershire Pension Fund, London Pension Fund Authority, Surrey Pension Fund, West Yorkshire Pension Fund and the Wiltshire Pension Fund.
