More than two-thirds of UK pension funds now have a commitment to a net zero alignment in place, according to a Pensions and Lifetime Savings Association (PLSA) survey. The number of pension funds with a net zero alignment increased from 57% in May 2022 to 68% this year.

Of the funds with a commitment in place, nine out of 10 are targeting being net zero compliant by 2050. Among those, some aim to be compliant earlier, with one in seven hoping to be compliant by 2035 (14%) and one in five working towards 2035-40 (18%).

Of the 27% of funds that don’t have a net zero commitment in place, 10% anticipate having one in place in the next one to two years, while 20% said they would have one in place within two or more years.

The PLSA survey showed that most continue to feel their pension fund has made significant progress in playing its part in the transition to a net zero society (64%), in line with the finding in 2022 (70%).

However, compared with last year, pension funds’ focus on ESG has been reduced because of other priorities such as the cost-of-living crisis and market volatility (31%) against 12% in 2022.

Most respondents (75%) continue to be concerned about recent news updates, which PLSA said suggests there is no sustainable pathway to limiting global temperature rises to 2˚C.

In addition, confidence in the UK meeting its climate targets has declined since November 2022. More than two-thirds (68%) now believe that the UK will not meet its climate targets, compared with less than six in 10 (59%) in November 2022.

Some 80% believe the UK prime minister’s recent announcement to delay net zero targets will have an impact on transition plans.

Compared with November 2022, more pension funds now feel there are obstacles the UK government could remove to assist in their work to address climate risk (67%, up from 53% in November 2022). More also feel the government should be doing more to enable investors to do more on climate risk (69%), up from 56% in November 2022.

Joe Dabrowski, deputy director of policy at PLSA, said: “We’ve tracked our members’ preparedness for net zero over a couple of years now and are really pleased to see their progress as data quality has improved.”

He said that the latest research indicates the window to limit global warming to 1.5˚C may be closing, adding that this has “grave consequences for society, pensions and savers”.

He continued: “It’s crucial that the government delivers on its green-transition strategy and avoids creating any uncertainty with mixed messaging on its climate and sustainability objectives.”

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