The green transition was a key concern for panelists speaking at the Pensions and Lifetime Savings Association conference in Edinburgh on Wednesday.
For a defined benefit pension fund such as the £11 billion ($13.7 billion) M&S Pension Scheme, Sheffield, England, which was closed to new participants in 2017, "we are not trying to be too dynamic," said Simon Lee, head of the M&S Pension Trust and CIO of the pension fund. The pension fund is ambitious in its net-zero transition goal of 2040, but "it is also relevant to our members," Mr. Lee said.
For Mark Fawcett, CIO of the £24 billion defined contribution multiemployer plan National Employment Savings Trust, London, getting a portfolio to net-zero will require more engagement with companies. "You can't divest your way to net-zero. We need to keep applying pressure and work with other asset owners and asset managers to get companies" to do more, he said.
Mr. Fawcett said he was also "a bit cautious" about carbon offsets. "They have to be developed, but they are probably not the main answer," he said. NEST is investing more in renewables and ways to finance a green transition, including infrastructure, private credit and private equity, he said.
Jason Fletcher, CIO of the £27.9 billion London LGPS CIV Ltd., said the 32 local government pension schemes "have got 32 different approaches to net-zero, and half haven't set targets." London CIV's target is 2040. While measurement of progress toward those targets is a challenge, "we do need to forge ahead," Mr. Fletcher said, and "we are going to have to start talking realistically about carbon offsets."
In addition to net-zero goals, U.K. pension funds now have to deal with reporting rules based on a framework developed by the Task Force on Climate-related Financial Disclosures. With 179 different requirements, "it's a whole new ballgame," said David Russell, head of responsible investing for the £82.2 billion Universities Superannuation Scheme, London, during a conference panel.
"It's really hard to get the data. Even the way we calculate the data" is a challenge, Mr. Russell said. "The data are poor and the processes for reporting the data are poor." USS reports TCFD data on its sovereign debt portfolio separately for that reason, he said, and private equity data "is roughly nil."
USS is one of several pension funds working with the PSLA to get more standardized environmental, social and governance data, he said.