{"id":82926,"date":"2024-12-05T13:36:55","date_gmt":"2024-12-05T13:36:55","guid":{"rendered":"https:\/\/www.climatepolicyinitiative.org\/?p=82926"},"modified":"2026-04-13T23:08:30","modified_gmt":"2026-04-13T23:08:30","slug":"unlocking-the-power-of-pension-funds-for-net-zero","status":"publish","type":"post","link":"https:\/\/www.climatepolicyinitiative.org\/pt-br\/unlocking-the-power-of-pension-funds-for-net-zero\/","title":{"rendered":"Unlocking the power of pension funds for net zero"},"content":{"rendered":"\n
David Fairs<\/em><\/a> is a Partner at LCP and former Executive Director for Regulatory Policy, Analysis, and Advice at the UK Pension Regulator. <\/em>Valerio Micale<\/em><\/a> is an Associate Director at <\/em>Climate Policy Initiative<\/em><\/a>, leading on the <\/em>Net Zero Finance Tracker<\/em><\/a>.\u00a0<\/em><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

With vast pools of patient capital, pension funds are critical\u2014yet underutilized\u2014sources of finance for the climate transition, including to support the UK\u2019s commitment to reach net zero by 2050<\/a>.  <\/p>\n\n\n\n

However, recent debate around UK pension funds has largely focused on their investments being used to boost the economy and consolidation across Defined Benefit and Defined Contribution arrangements to facilitate that. These aspects are also critical to tackling the climate crisis.\u00a0<\/p>\n\n\n\n

Research from CPI<\/a> reveals how European pension funds are progressing on setting climate targets and taking action. While the UK can be pleased it is not one of the laggards in the dataset of more than 340 schemes representing USD 7.8 trillion in assets, it could also take lessons from other countries to accelerate action.\u00a0\u00a0<\/p>\n\n\n\n

UK PENSION FUNDS: MIDDLING PERFORMANCE<\/strong> <\/h2>\n\n\n\n

CPI\u2019s Net Zero Finance Tracker (NZFT) shows a moderate performance from the 96 UK pension funds it tracks on setting climate targets and implementing policies to achieve them. Legislative efforts have driven progress, placing the UK in the top five European countries for taking action, behind only Sweden, Denmark, Norway, and the Netherlands. <\/p>\n\n\n\n

Although the UK\u2019s regulatory framework, including mandatory climate-related disclosures since 2021 for schemes of over \u00a35bn and 2022 for those over \u00a31bn, has driven progress, some schemes may still approach these requirements as a compliance exercise. <\/p>\n\n\n\n

HOW POLICY IS DRIVING CHANGE <\/strong> <\/h2>\n\n\n\n

Recent regulations, including the roadmap for mandatory disclosures, have prompted larger pension schemes to start addressing climate risks and opportunities. These have required establishing appropriate governance, strategies, targets, and metrics specifically related to climate. Inevitably, some schemes fully embraced requirements while others took a compliance-driven approach. <\/p>\n\n\n\n

A UK Pensions Regulator review of the first set of 71 disclosures in 2023 noted that 43 included a formal net zero target. However, these targets were new, and few schemes had clear implementation plans.  <\/p>\n\n\n\n

While there is no legal requirement for trustees to set net-zero targets, the Pensions Regulator has highlighted this as an \u201cappropriate step\u201d. <\/em>A <\/em>second review published this year noted that 19 of the 30 TCFD (Taskforce for Climate-Related Disclosures) reports reviewed included some form of net zero goal, with 13 setting a formal target.  <\/p>\n\n\n\n

The UK\u2019s regulatory push is replicated in other countries across Europe. However, the challenge around climate-related financial disclosures is that they don\u2019t necessarily drive change, especially at the pace needed for asset owners like pension schemes to have a meaningful impact on action to limit temperature rises.  <\/p>\n\n\n\n

PROGRESS WITH AREAS FOR IMPROVEMENT <\/strong> <\/h2>\n\n\n\n

CPI\u2019s survey of 342 European pension funds shows that progress is being made but with clear areas for improvement. Many pension schemes, particularly large funds, have set targets. But these will only support the net zero transition if backed by clear and credible implementation strategies.  <\/p>\n\n\n\n

The number of tracked European pension funds with a climate investment target has increased from none in 2019 to 35 in 2023, representing some USD 2.2 trillion in assets under management or owned, though only three publicly disclose such goals.  <\/p>\n\n\n\n

Meanwhile, 60 schemes were targeting a part or all assets for fossil fuel phase-out, exclusion, or divestment in 2023, marking a significant shift from the two with such targets in 2019.  <\/p>\n\n\n\n

In terms of schemes that have taken implementation action, the numbers have grown from 26 to 100 with action being taken mostly on governance, engagement, and disclosure of climate risk, investment data, and emissions data. <\/p>\n\n\n\n

Despite the observed progress, this still leaves a significant number of pension funds without any reported target or action. <\/p>\n\n\n\n

THE WAY AHEAD <\/strong> <\/p>\n\n\n\n

The research shows that regulatory efforts are indeed driving pension funds response, particularly in Nordic countries, but also confirms some intuitive beliefs:  <\/p>\n\n\n\n