XPS calls for fund managers to step up on climate risk data

In response to the DWP Consultation, XPS says that for trustees to get a true sense of climate risk in their portfolio, modelling and monitoring needs to be highly granular, reflecting risks at individual company and sector level rather than through big picture asset class allocations.

XPS Pensions Group is strongly supportive of the proposal and recognises that climate change poses a systemic and financially material risk that has the ability to impact member outcomes. We consider the DWP’s proposals to be aligning climate risk to the fiduciary duty of trustees to act in the best interests of their members. But meeting the requirements will require a step up in terms of information that investment managers are able to provide on their portfolios. For instance, managers should be able to provide and report carbon footprints of funds as a norm.

Sarita Gosrani, Head of ESG Research at XPS says ‘We are therefore calling for accompanying measures to be applied to the fund management industry which is not yet fully prepared to support trustees with meeting the requirements in their entirety. Only 1% of investment managers that are UN PRI signatories made the PRI Leaders’ Group 2020 which had the theme of climate reporting. This is telling of the ramp up action required’