With global attitudes towards climate action shifting, including the US withdrawal from the Paris Agreement and major asset managers stepping away from voluntary climate initiatives, the Trustee Sustainability Working Group (TSWG) has warned that pension trustees must not lose sight of the urgency of climate change. The group stressed that shifting international priorities should not be used as an excuse to push climate concerns down the agenda. Instead, trustees are encouraged to take proactive steps to ensure their investment strategies remain resilient given the rapidly-changing environmental and regulatory landscape.
The TSWG was launched in December 2024 to accelerate the implementation of good sustainability investment practices across the industry. The group’s comments were responding to a paper from the Institute and Faculty of Actuaries (IFoA), which reinforced the urgent need for policymakers to provide the necessary frameworks for businesses and individuals to contribute to environmental restoration. Reflecting on the paper, the TSWG urged trustees to stay focused on climate action rather than allowing environmental, social and governance (ESG) concerns to slip down their priorities.
The role of pension schemes in climate action
UK pension schemes collectively manage nearly £2tn in assets, with the industry made up of both large pension schemes with the resources to take decisive action and smaller schemes with more limited capacity to address climate issues. However, the group pointed out that while UK pension schemes cannot solve the climate crisis alone, they can each play a significant role in addressing it. They emphasised that all schemes, regardless of size, still have a role to play in building a more sustainable future.
The TSWG also called on investment managers and consultants to go beyond just measuring emissions. They urged a broader focus on the financial risks of a world failing to transition to a sustainable future. To support this, they highlighted the need for innovation to ensure pension scheme investments, such as global index tracking funds, remain resilient.
TSWG priorities for 2025
The TSWG has also set out its six key priorities for 2025, focusing on collaboration with regulators to refine climate scenario analysis and reporting requirements, particularly for smaller pension schemes. These include helping the industry to develop a transition plan ‘with real world impact’ for larger schemes that could then be rolled-out to smaller schemes after best practice has been established. The group believes its approach could eventually replace the Task Force on Climate-Related Financial Disclosures (TCFD) and eliminate the need for separate frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the Taskforce on Inequality and Social-related Financial Disclosures (TSFD).
TSWG also plans to offer a clear stance on significant industry debates, refining previous discussions while incorporating new concerns that arise throughout the year. The group acknowledged that its priorities are subject to ongoing review and may evolve.
A key regulatory focus for 2025 is securing amendments to the implementation statement for smaller schemes, aiming to ease their compliance burden. TSWG also wants to build on the progress made with ShareAction in 2024 by encouraging small schemes to engage in a select number of stewardship initiatives each year.
Focus on fossil fuels and transition plans
TSWG has also placed a strong emphasis on addressing fossil fuel projects. While the group supports efforts to prevent new developments or approvals, it clarified that this does not equate to immediate disinvestment. Another priority is helping the industry develop transition plans for large schemes that can drive real-world change. The goal is to establish effective strategies that can be extended to other pension schemes over time.
More guidance to come on climate strategy
The TSWG also recognised that pension trustees are under increasing pressure due to governance demands. Regulatory requirements such as the pensions dashboard, the new effective system of governance (ESOG), and the updated funding code are placing a heavy burden on their time. The group confirmed that further guidance will be shared soon on how trustees can manage their resources effectively to address the climate emergency in 2025 and beyond.
Engaging members on action on climate change
Luke Carter, Regulatory Consultant,
“With the introduction of automatic enrolment, many younger people are saving for the future. Demonstrating action taken on climate change can help engage younger savers, who will be most impacted by the climate crisis. Investment options and illustrating how savings can make a difference, will help. Saving for the future may not cost them the world.”
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