The government must show “global leadership on pensions and climate change”, MPs have said. The call comes in a report published by the influential Work and Pensions Select Committee. It wants the government to “seize the opportunity” from the upcoming Glasgow-based COP26 (26th United Nations Climate Change conference). The committee’s report makes recommendations on reporting standards, pension scheme governance and investment and stewardship. It argues harmonising climate-related reporting standards must not be a barrier to the UK rapidly implementing its own. The report concludes encouraging behavioural change in companies through good stewardship is more likely to drive change than divestment. Hosting COP26 provides the UK with a unique opportunity to build an international consensus on reporting standards and stewardship and the government must seize it with both hands. While taking a lead on pushing for the global harmonisation of climate-related reporting requirements, experts believe, the UK must not let up in implementing high standards of reporting and disclosures domestically. The thinking is that pension schemes can play a major role in helping the real economy transition to net zero but encouraging companies to become more sustainable through good and effective stewardship should always be the first step before moves to sell off assets that are unable to reduce their contribution to climate change. Key to change is government policy, which needs to ensure that its policies do not incentivise divestment over good stewardship of schemes.

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