Cartwright, an independent, privately-owned pension actuarial, investment consulting, administration and consultancy firm, is urging trustees to answer the question “How climate ready is our pension scheme?”
Adam Gregory, Head of Responsible Investment at Cartwright said: “When it comes to ESG and sustainable investing, the pensions industry is undoubtedly moving in the right direction, but there is much more that can be done if we want ESG, and climate change in particular, to become part of the DNA of pensions saving, a destination that much of the rest of the investment industry is fast moving towards.
“A wide range of tools and analysis now exists to test where a given fund or scheme sits on the climate spectrum so there is no longer any excuse. As a starter for ten, we recommend trustees use the following tools or analysis to enable them to get a better idea of the sustainability of their investments.”
ESG Integration Ratings: These ratings should be a natural feature of fund research so that trustees are confident that ESG risks and opportunities are an integrated part of each buy-list fund’s investment process and philosophy.
Carbon footprint analysis: This shows the current emissions of a scheme’s portfolio. Fund managers are increasingly making this information available to investors, and trustees can easily obtain this.
PACTA Analysis: Whilst a simple carbon footprint score can show you your current portfolio emissions, a PACTA analysis projects forward how your carbon footprint might look in the future allowing for future business plans.
Scenario Analysis: This assesses how a scheme’s funding position could be impacted by different climate scenarios: What happens if the world follows an orderly transition aligned with Paris Accord goals? What if climate action today isn’t sufficient and the world reacts in five years? What might happen if we stay on our current path, i.e. a failed transition? This gives trustees the big picture as it looks at the whole of the assets, liabilities and therefore the deficit. Combining this with how the company covenant may be affected can give trustees a stronger understanding of the strategic risks the scheme is exposed to and identify any quick wins to mitigate these risks.
Gregory says: “We’re encouraging trustees and companies to think about driving sustainability from the inside out through the analysis we undertake on their behalf. We’re also taking the time to consider our own impact on the environment and our sustainability, and I’m pleased to say that we recently achieved Carbon-Neutral status, something that the whole firm is immensely proud of.”