Retirement plans of the future will focus on responsible investment, good governance and strong culture, speakers said at the Pensions and Lifetime Savings Association annual investment conference.
Retirement plan executives will also face pressure from the business models of their sponsoring employers over the next decade as well as figuring out how to unearth returns, said panelists at the conference, which took place March 11-13 in Edinburgh.
Noting that plans need to join together to ensure their governance processes are robust, Denise Le Gal, chairwoman of Brunel Pension Partnership, Bristol, England, a £30 billion ($39.1 billion) pool of U.K. local authority pension funds, said on a panel that current fund structures are not sustainable if executives are serious about improving governance.
"A further consolidation is probable in the local authority pools and the private sector," she said.
Ms. Le Gal added that centering retirement plans' work around responsible investment, good governance and culture will help alleviate the pressure from traditional challenges such as funding gaps.
"If you (get) those right, then you are in (a) position to invest in good sustainable companies and not to invest in companies that may not be around in 10 years," Ms. Le Gal said.
"We have a huge role to play in influencing that the world grows in a sustainable manner," she added.
Exposure to climate-related risks will be the biggest theme for retirement plans by 2030, retirement plan executives said.
"We need to understand it to protect (returns) from those risks," said Nico Aspinall, CIO of the People's Pension, a £9.7 billion defined contribution multiemployer plan in West Sussex, England, sponsored by B&CE in the same panel discussion as Ms. Le Gal.
"We — as a plan that will have between £50 (billion) and £60 billion in assets in a decade — need to encourage the private sector to get to zero net emissions by 2050," he said.
Avoiding brown assets, for example stocks of coal producers, is not the same as divesting, Mr. Aspinall said. "We need to use contributions to build (a) green economy," he said. But he added that it is as important for retirement plans to engage with the "brown economy" oppose to straight divestments.