Will Employees Benefit?

Protecting Corporate Pensions Against Climate Change


Climate change is a major systemic threat to global financial stability, posing both short and long-term risks. Pension savers, due to the long-term nature of their investments, are particularly exposed to these risks.

This report lays out findings from ShareAction’s survey on the management of climate-related risks and opportunities within some of the UK’s largest defined contribution (DC) corporate pension schemes.

Click the button below to read the full report or scroll down to explore the key findings and recommendations.

This research will support ShareAction’s programme to encourage and enable corporate pension schemes develop world-class approaches to managing climate-related risks and opportunities.

Of the 25 corporations approached, 15 participated (10 use employer-sponsored trusts and five use master trusts), representing approximately one million savers and £17.5bn assets under management.


The research found wide variance in corporate pension schemes’ integration of climate-related risks. Some schemes are just starting the journey towards the integration of climate-related risks, while others have highly developed strategies.

We also uncovered commonalities across the schemes surveyed, which highlight areas of best practice and concern, and used the findings to inform our climate risk check list for corporate pension schemes to improve their climate risk integration and recommendations for policymakers and regulators to create an environment which best encourages them to do so.


There are four degrees of integration

Participants’ submissions were analysed and each scheme was categorised according to the level of development of their climate change strategySchemes furthest along the journey towards the integration of climate-related risks explicitly address climate change through asset allocation and stewardship, and consider it as a systemic risk, while those at the business as usual stage may not have specifically considered climate-related risks




Aviva Staff Pension Scheme
The Barclays Banks UK Retirement Fund
RBS Retirement Savings Plan
Tesco Retirement Savings Fund (MT)
Unilever UK Pension Fund DC Investing Plan

*MT = corporation using a master trust


GSK Pension Scheme
Lloyds Your Tomorrow Pension Scheme
Rolls-Royce Retirement Savings Trust
Sainsbury’s Retirement Savings Plan (MT)
Your M&S Pension Savings Plan (MT)

*MT = corporation using a master trust


Business as usual

British Airways Pension Plan (MT)
Diageo Pension Plan (MT)
National Grid YouPlan
Royal Mail Defined Contribution Plan

*MT = corporation using a master trust



Associated British Foods DC Pension Scheme
BAE Systems DC Retirement Plan
BP Defined Contribution 2010 Pension Plan
BT Retirement Savings Scheme
Centrica DC Scheme
Compass Retirement Income Savings Plan
2013 NEXT Group Pension Plan
Prudential Staff Pension Scheme
UK Shell Pension Plan
Whitbread Group Pension Fund


Default funds are conducting business as usual

Only two of the 15 schemes currently have default funds that have been explicitly constructed to reduce exposure to climate-related risks.


Awareness across employer-sponsored trusts is not leading to action

Eight of the 10 participating employer-sponsored trusts have discussed climate-related risks with their investment consultants, either specifically or as a part of ESG considerations. However, only two of the 10 employer-sponsored trusts have added climate-related risks to their scheme’s risk register and just three of the 10 employer-sponsor trusts have conducted scenario analyses.


Employer-sponsored trusts take a passive approach to climate stewardship

The majority of employer-sponsored trusts delegate stewardship activities to their asset managers with limited oversight of the effectiveness of climate risk management. Only two of the 10 employer-sponsored trusts stated they assess each asset manager’s climate-related performance during the asset manager selection process.


There are barriers to action

The participating schemes identified a number of barriers they perceive restrict actions in this space, including:

  • The availability of products for a multi-asset portfolio being limited by fees and suitability.
  • The lack of standard, widely used metrics to monitor, manage, and report climate-related investment risks.
  • Challenges in agreeing risk and return metrics that can isolate the impact of ESG factor implementation, in order to satisfy trustees that the methodology adopted is having the desired impact.
  • When transferring to a new master trust, alignment to and consistency with, the old DC scheme was prioritised.
  • The quality and consistency of corporate data.


Corporate pension schemes lag behind corporate commitments

13 of the 15 participating corporations are involved with or support low-carbon initiatives such as the Science-Based Targets Initiative and the Taskforce on Climate-related Financial Disclosures (TCFD). However, these commitments are only reflected in a small minority of DC corporate pension schemes across both asset allocation and engagement. As strategies relating to the management of climate-related risks and opportunities are further developed, schemes have an excellent opportunity to communicate the actions taken to address climate change with their members, building trust with savers and further showing how employer and employee values align.


We suggest a number of actions for employer-sponsored trusts and corporations that utilise master trusts or group personal pensions (GPPs) to enhance their approach to climate change and its implications. These have been separated to reflect the differences in governance.

We have also produced recommendations for policymakers and regulators to ensure the regulatory environment is supportive of this change.  



Climate risk checklist

For employer-sponsored trusts

Seize opportunities and mitigate risk 

  • Use the opportunity of the Department for Work and Pensions’ (DWP) update to the Investment Regulations (in force from October 2019) to publicly commit to greater action on the management of climate-related risks and opportunities through asset allocation and stewardship practices.  
  • Climate-related risks should be added to each scheme’s risk register, recognising that it poses a systemic risk that will impact beneficiaries’ investments and quality of life in retirement. 
  • Conduct scenario analysis under multiple warming scenarios to evaluate their exposure to climate-related risks.  
  • Construct default funds which systemically integrate climate-related risks and opportunities into investment decisions across all asset classes.  

Promote enhanced engagement and accountability 

  • Schemes and their investment consultants should specifically incorporate strong engagement and voting activities into their investment management agreements with asset managers. 
  • Schemes should advocate for action at a policy level to address climate change via initiatives such as the Institutional Investors Group on Climate Change (IIGCC). 

Educate and communicate 

  • Communicate the actions the scheme is taking to manage climate-related risks to beneficiaries, to engage savers with their pensions and build trust.  
  • DC corporate pension schemes should become signatories to the PRI. 
  • Where available, schemes should utilise climate change expertise from their corporate sponsor.  
  • Schemes should review and report on their management of climate-related risks in line with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.

For employers utilising master trusts or group personal pensions

Promote enhanced engagement and accountability

  • Schemes should ensure their default funds explicitly address climate-related risks and opportunities through asset allocation.
  • Corporations and their investment consultants should greater scrutinise the engagement and voting activities of their master trusts and pension provider regarding climate-related risks.
  • To monitor ongoing progress, corporations, either individually or collaboratively with other employers in the same master trust or group personal pension, should set time bound targets on the response to climate change.
  • If switching master trusts or group personal pension providers, corporations should include the approach to climate-related risks and opportunities as a key criteria.

Educate and communicate

  • Schemes should communicate the actions taken to manage climate-related risks and opportunities to beneficiaries, to engage savers with their pensions and build trust.
  • Where available, corporations should utilise in-house climate change expertise.

Recommendations for policymakers and regulators

  • Introduce mandatory reporting for schemes on climate-related risks in line with TCFD recommendations.
  • The Pensions Regulator should update the Trustee Toolkit and investment governance guidance to outline available options to address climate change as a systemic risk.
  • The Financial Conduct Authority (FCA) should provide the same level of clarity as the DWP on the need to consider climate change and other environmental, social, and governance (ESG) factors as a material financial risk, and report on the management strategy. Parity in respect of stewardship policies should also be achieved.