Consulting firm LCP has welcomed the recently elected UK Labour government’s plan to require pension schemes to produce transition plans, calling it a “transformative” shift in regulatory emphasis. The Labour manifesto proposed a ruling for UK pension funds to produce strategies that are consistent with keeping global warming below 1.5°C. This would shift the current emphasis of existing climate requirements for pension schemes from an “outside-in” to an “inside-out” perspective, LCP said. The group recommended the mandate should initially only apply to larger schemes, with eligibility based on risk exposure. Disclosure rules should also be principles-based as opposed to being too prescriptive, it added. In addition, the government should look to clarify that trustees can take a long-term perspective and consider pensions’ long-term, real-world impact as part of their fiduciary duty. “Transition plans will potentially be a transformative shift of the regulatory emphasis when it comes to climate monitoring and reporting, encouraging trustees to consider the real-world impact of their decisions,” said Claire Jones, Head of Responsible Investment at LCP. “The devil will of course be in the detail, and we wait to see what the requirements will be. Ideally, the plan will be principles-based with a focus on actions.”
