Pension funds call on banks to step up climate-related reporting

One of the UK’s leading auto-enrolment pension funds and several Swiss pension schemes are part of a $1.8trn (€1.5trn) institutional coalition calling on banks to supply more robust and relevant information about climate-related risks and opportunities.

The investors are writing to the chief executive officers of 60 of the world’s largest banks.

The letter was coordinated by responsible investment campaign group ShareAction and Boston Common Asset Management.

It comes amid a growing desire among asset owners and asset managers for more robust climate-related disclosures and risk management from multiple industries.

This is in part fuelled by the recent publication of recommendations by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

As the TCFD’s framework is voluntary, “progress depends on investors pressing for action”, said a statement about the investor campaign.

European asset owners putting their names to the letters include the £2bn (€2.2bn) National Employment Savings Trust (NEST) and the £3.8bn Environment Agency Pension Fund in the UK, and Swiss multi-employer funds Caisse Inter-Entreprises de Prévoyance Professionnelle and Nest Sammelstiftung, with €5.5bn and €2.1bn assets under management, respectively. Finland’s €22bn Elo Mutual Pension Insurance and Swedish pensions and insurance firm Folksam are other European asset owners in the coalition. Asset managers supporting the campaign include Aegon, Candriam, and Storebrand.

Roland Bosch, associate director for engagement at Hermes EOS, the stewardship arm of Hermes Investment Management, said: “We believe that the banking sector can do more to expand its disclosure of how climate risks and opportunities are being assessed and managed.”

Isabelle Cabie, global head of responsible development at Candriam Investors Group, said: “As a result of climate change and the low-carbon transition, banks now face risks and opportunities that are real, wide-ranging, and material to investors.

“As long-term investors, better disclosure of climate risk allows us to judge how specific banks are performing compared to their peers, and so we ask that banks pay heed to this important call from the investor community.”

The letter calls for more robust and relevant climate-related disclosure in four key areas: strategy and implementation, risk assessments and management, low-carbon banking products and services, and banks’ public policy engagements and collaboration with other actors on climate change.

Banks are exposed to climate change-related risks and opportunities through their lending and other financial intermediary activities as well as through their own operations. Setting out its reporting guidance for banks, the TCFD said that that “investors, lenders, insurance underwriters, and other stakeholders need to be able to distinguish among banks’ exposures and risk profiles so that they can make informed financial decisions”.

In June the Bank of England announced it was extending its work on climate-related risks to the regulated UK banking sector, having initially focussed on the insurance sector.