The UK Sustainable Investment and Finance Association (UKSIF) has warned that climate risk is missing from the review into the UK’s pension system.
UKSIF chief executive officer James Alexander has written to the Pensions Commission, urging it to place climate risk and the net-zero transition at the centre of its review of the UK pensions system.
His warning comes after the UK government revived the Pensions Commission to address savings inadequacy earlier this year and ahead of the Pensions Commission publishing its interim report next spring.
In a letter to the Commission’s chairs, Alexander warned that neither global temperature rises nor the accelerating shift toward decarbonisation are explicitly referenced in the government’s terms of reference, an omission the organisation said risks undermining the UK’s ability to build a resilient pension system fit for 2050 and beyond.
Alexander wrote: “As we approach 2050 and beyond, and as global temperatures continue to increase, the overall value of UK pension portfolios could be put at immense risk due to physical and transition-related climate risks.
“From our perspective, climate change cannot be divorced from the main focus areas highlighted in the Commission’s terms of reference.”
Alexander’s letter went on to note that while the Commission may not be well-placed to deliver detailed recommendations, UKSIF suggests the Commission, at a minimum, highlights the need for the government’s pensions review to consider climate change and the global transition to net zero.
He added that climate change and wider sustainability factors should be seen as “inextricably linked” to the scope of the Commission’s work, as it has been tasked with examining risks to “future cohorts of pensioners on current trajectories through to 2050 and beyond”.
The letter, released during the final week of COP30, also outlined broader recommendations, building on UKSIF’s pension review published earlier this year, to improve retirement adequacy, after the UK slipped out of the top 10 in Mercer’s Global Pension Index.
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