Sustainable finance policy a ‘blind spot’ for pension funds

The majority of Europe’s biggest pension funds are not actively engaged in emerging EU-level sustainable finance policy, according to climate think tank InfluenceMap.

Its research, which covered 25 of Europe’s largest pension funds and 10 national pension fund associations, found that only four of the 25 funds and five of the 10 associations showed ‘meaningful engagement’ with sustainable finance policy.

InfluenceMap stated that these findings pointed to a potential ‘blind spot’ for the industry, which has shown an increasing level of climate awareness in stewarding the companies within their investment portfolios.

It added that their ‘relative silence’ on climate-related financial policy development was being filled by financial industry associations, some of which have “strongly pushed back” on the EU’s sustainable finance proposals.

Norway’s Norges Bank Investment Management, Dutch fund Pensioenfonds Metaal en Techniek, and UK-based schemes Universities Superannuation Scheme and BT Pension Scheme were identified as the more positive advocates for ambitious sustainable finance policies.

The UK’s Pensions and Lifetime Savings Association stood out as the most supportive amongst the associations, while PensionsEurope was found to be one of the most engaged entities, communicating high-level support for many sustainable finance policies in Europe, although it has “cautioned against” a prescriptive approach to regulatory intervention.

InfluenceMaps’ report noted that negative policy engagement appeared to be more common in pension industry associations with a higher proportion of real economy corporate pension fund members.

“While some of Europe’s pension funds are clearly trying to take the threat of climate change seriously, most are not actively engaged on emerging sustainable finance policy,” said InfluenceMap senior analyst, Paula Castro.

“This points to a potential blind spot for the industry. It means that industry associations - which often take a more negative approach to policy - are the loudest voices at an EU level. Given the enormous amounts of money invested in pension funds, these organisations have significant influence when it comes to pulling levers to address the climate crisis.”

Make My Money Matter CEO, Tony Burdon, added: “This is the first comprehensive stock take of Europe’s largest pension schemes and their associations, and their actions on net zero. And while it is encouraging to see some good leadership in the UK, overall the picture painted is not good enough if we are to tackle the climate emergency, and the risks to the savings of millions of people in the UK and Europe.

“That is why our governments must regulate for a net-zero financial sector and wider economy in order to limit warming to 1.5˚C. It’s why pension funds must respond to the millions of members who want their money to tackle and not cause the climate emergency.”

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