Climate strategy is becoming a key differentiator among DC Master Trusts

Climate strategy is becoming a key differentiator among DC Master Trusts

02 Sep 2026

• All but one DC Master Trust reviewed has a Net Zero or Paris Aligned objective, but only 50% have a clear focus on transition alignment.
• Shifting focus from reducing portfolio emissions towards investing in the climate transition should help to maximise long-term outcomes for members.

DC Master Trusts take different approaches towards climate change and there are clear leaders and laggards in different areas, according to new analysis from XPS Group.

XPS’s latest investment briefing, Climate Strategy in DC Master Trusts, reviewed 16 Master Trusts covering more than £200 billion of assets. It found that, while almost all have a Net Zero or Paris-aligned objective, only 50% demonstrate a clear focus on transition alignment, with the majority framing their headline targets around reducing portfolio carbon emissions.

The research also revealed that, while 56% currently invest in climate solutions, such as renewable energy, grid infrastructure and technologies supporting decarbonisation, only 25% have an explicit target to increase their allocation to solutions.

XPS believes these investments could help manage climate risk while creating opportunities to enhance long-term returns for members. This is particularly important for DC savers because the effect of climate-related impacts flows directly through investment performance, retirement timing, sequencing, and the real-world purchasing power of their retirement savings.

Meanwhile, recognition of nature and biodiversity risks is widespread across the market, but few Master Trusts currently translate this into dedicated investment allocations.

Alex Quant, Partner and Head of Responsible Investment at XPS Group, said:

“DC Master Trusts are among the leading asset owners on climate strategy, but having a Net Zero target doesn't automatically translate to better outcomes for members. Focus needs to shift from reducing portfolio emissions towards investing to support the global climate transition and accessing the potential to enhance long term returns for members.”

“Effective management of climate change risks and opportunities will be a key factor in long term returns and growth of pension pots, so Master Trust Trustees and providers should proactively review their strategies to ensure they are happy that their approach aligns to best practice. Those that translate climate commitments into investment decisions, stewardship and capital allocation effectively should be better placed to deliver strong member outcomes over the long term.”

---

Methodology

XPS reviewed publicly available climate reports, sustainability disclosures and stewardship documentation from 16 UK DC Master Trusts covering over £200 billion of assets. The analysis assessed approaches across Net Zero commitments, transition alignment, climate solutions investment, stewardship activity, nature-related considerations and wider climate governance arrangements.