Climate and diversity top 2022 UK pension agenda

February 25, 2022

UK pension funds will focus on climate change issues and corporate compliance with the Task Force on Climate-related Financial Disclosures (TCFD) in the 2022 proxy voting season.

The Pensions and Lifetime Savings Association (PLSA), the UK’s member organisation for pension funds, has set out the priorities in its annual Stewardship and Voting Guidelines for 2022.

On climate, the PLSA encouraged companies to improve their reporting in line with the TCFD’s recommendations in order to support UK pension funds. Large schemes have been required to report climate change portfolio risks in line with the TCFD since October.

Specifically, the association called for improved disclosures around environmental impacts, including Scope 1, 2 and 3 carbon emissions.

Also high on the agenda for pension funds are diversity and executive pay, with companies being urged to “be cautious” on remuneration decisions “especially where they have benefited from government support” through the pandemic.

The PLSA acknowledged that good progress had been made on improving board diversity in UK companies, and called for the focus on diversity to continue. In addition, “FTSE 100 companies that are failing to meet the Parker Review target of ‘no white boards’ by 2021, should expect to see this challenged by investors”, the association said.

Nigel Peaple, director of policy and advocacy at the PLSA, said that while the past two years had been “incredibly tough”, the 2022 AGM season was “an opportunity for pension scheme trustees and their asset managers to engage with company directors, to revisit environmental, social and governance policies and seize the chance to build back better than before”.

“As part of this we have strengthened the language on expectations on TCFD disclosures, to which all companies should be held accountable,” he said. “And while climate change matters remain vital to address, it’s also important to not forget the other aspects of ESG investing.

“This is not only the right thing to do but also that numerous studies have shown that companies that uphold the highest ESG standards tend to financially outperform as well, adding value to the millions of pension savers they count among their shareholders.”