Commenting on the Local Government Pension Scheme (England and Wales) consultation: ‘Governance and reporting of climate change risks’, Philip Pearson, Head of LGPS Investment said:

“We welcome the publication of DLUHC’s consultation on the governance and reporting of climate change risks for LGPS Funds in England & Wales. This provides clear direction for Funds on the steps they will need to take to further develop their approach to addressing and reporting on climate change risks. The timescales are sensible, with the first reports due by December 2024, although we expect that a number of Funds will be in a position to report ahead of this deadline given the work that has already been undertaken to address climate issues. Governance also plays an important role in the proposals with emphasis being placed on assessing and managing climate-related risks and opportunities. This makes the consideration of climate risk much more than a reporting exercise; Funds will need to ensure that all parties involved in the management of investments are properly addressing climate risk.

“The proposals will create consistency across the whole of the pensions industry and we believe it right that these requirements are at least as high as in the private sector. LGPS funds have open-ended time horizons making climate change an ongoing challenge for Funds whilst they generally retain higher allocations to growth assets. This gives Funds the ability to both influence outcomes, and support the development of climate solutions. Finally, we believe it appropriate that the requirements should apply to all LGPS Funds, regardless of size, creating the opportunity for combined reporting. We are wary of making the content of the Climate Risk Report mandatory which runs the risk of group-think and Funds not giving enough consideration to the specifics of their own assets/strategy. Whilst further guidance from DLUHC will be welcome on this, we believe a non-mandatory reporting template may offer a more practical solution for Funds.”