The UK government is planning “more and more action” on climate change and environmental issues in the build up to the COP26 conference next year, according to the country’s pensions minister.
Guy Opperman, the minister for pensions and financial inclusion, described climate change as “the defining issue of our time” during an address to the Pensions & Lifetime Savings Association’s (PLSA) annual conference, taking place online this week.
“The risks have the ability to wipe out swathes of the economy,” he said. “The government will be making announcements on climate change considerations on the whole investment chain, and you can expect more and more action in the lead up to [COP26].”
While he did not provide specific details, Opperman highlighted his dialogue with the Financial Conduct Authority (FCA) and its planned work on applying Task Force on Climate-related Financial Disclosures (TCFD) standards to asset managers.
A consultation is in the planning stages, with the Financial Conduct Authority (FCA) intending to publish final rules next year and implement them from 2022.
“The direction of travel is clear,” Opperman said. “The purpose of that work was to make sure that pensions organisations and asset managers are aligned. The FCA’s move on accelerating that work is very significant and helpful.”
The government has already included TCFD reporting standards for pension funds in its Pension Schemes Bill, which is currently making its way through parliament, and the Department for Work and Pensions has recently completed a consultation on how to implement the standards.
Opperman’s comments came as the PLSA published a new report setting out “solutions to the barriers” preventing schemes from acting more decisively on environmental risks.
The report includes a series of recommendations and calls to action for government and regulators, including simplifying standards and improving data, as well as lobbying for more climate-aligned assets such as ‘Green Gilts’.
Opperman said he was “listening” to calls for the government to issue green bonds. Several other European countries have issued bonds linked to environmental developments and the green bond sector has grown rapidly in recent years. NN Investment Partners is forecasting the global green bond market will grow to €1trn by the end of 2023.
On the Pension Schemes Bill, the minister said he was “optimistic” that it would become law by the end of this year. The legislation has faced multiple delays since being introduced to parliament last year, including the December election and the COVID-19 pandemic.
“I will go to great lengths to make sure our efforts deliver better outcomes for pension schemes,” Opperman said, adding that the bill was designed to make pension saving “better, safer and greener”.
As well as the climate change reporting requirements, the bill includes a framework for collective defined contribution schemes and rules for the proposed pension dashboard.
The PLSA’s report is available here.