Open letter to UK Government on unlocking pension sustainability reforms

LCP and Pensions For Purpose have called on Downing Street to make changes to framework around pension schemes to help drive climate-related investments and tackle intergenerational inequalities. 

Addressed to Pensions Minister, Laura Trott, the organisations have asked for a raft of reforms which could see the sector increase its connection to the environmental and green economy. Structural barriers that prevent pursuing opportunities to hold impactful sustainable investments when dealing in gilts and low-risk corporate bonds must be removed as a priority. 

Pension trustee fiduciary duty interpretations should also be rethought, encouraging longer term, sustainable investments. Those behind the letter point to compelling evidence which shows this approach offers comparable, and in some cases, better returns, but guidance to decision-makers is severely lacking. Longer-term risks to the UK economy posed by the disproportionate number of younger workers on defined contribution pension plans must also be addressed. 

‘Clear action needs to be taken on ensuring sustainability is integrated into all levels of pension fund decision making, including fiduciary duty, the governance process, mechanisms for consolidation and intergenerational fairness,’ said Charlotte O’Leary, CEO of Pensions for Purpose.

‘This can only be achieved through collaboration between the pension industry, government and regulators,’ she continued. ‘What we are talking about requires a paradigm shift in thinking and the time for that is now, not just to protect but to enrich pension member outcomes, society and the environment. We strongly urge the UK government, The Pensions Regulator and industry stakeholders to work with us in implementing these targeted reforms.’

More on pensions, investment and climate:

Environmental affordability: Climate crisis costs $391million per day

How local government pensions are fuelling regional green investment

‘If we don’t fix it, we won’t need pensions’: Reset Connect 2023

Image: Rui Chamberlain