The study found that fewer than a third (30%) of funds have invested in natural capital such as forestry – low in comparison to the 80% who have invested in renewable energy sources.
Data is the other big hurdle for funds to clear, according to the leading pensions and financial services consultancies’ findings. Obtaining metrics that illustrate the risks and opportunities of investment is a difficult and time-consuming task for funds. Collating meaningful data has improved in recent years, but there still needs to be more focus on this. Understanding the meaning behind the data and taking the right actions as a result is where the true value lies.
Baseline climate knowledge of boards and committees appears to be good with nearly three quarters (70%) having sufficient knowledge of both climate risk and net zero. However, only a third (33%) of boards have enough understanding of natural capital and biodiversity. More education in this area will be important for funds to mitigate the climate risks of their investments, claims the firm.
Commenting on the barriers posed by a lack of reliable data and appropriate assets, Iain Campbell, Head of LGPS Investment, Hymans Robertson, says: “Funds have started to move the dial towards reaching their climate goals. However, as our research uncovered, the problems of data, and lack of appropriate assets, are high bars for funds to clear. There are two good reasons to remain optimistic that funds will make this leap. Firstly, the quality of data obtained by funds has significantly improved in recent years. We anticipate that funds will build on this progress and continue to benefit from better availability of data in the near future.
“The second reason to be hopeful is that currently boards’ knowledge around nature and biodiversity is low. While this doesn’t sound like a success story, we hope that as knowledge of boards and committees grows, the money will follow. Given the strides that LGPS funds have already made in setting and progressing towards their climate goals, I hope they can build on this momentum and surpass these barriers.”
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