Contract-based pensions and climate risk: Report and recommendations to the Financial Conduct Authority

The report finds a significant gap in how UK contract-based pension providers manage climate risk compared to trust-based schemes, urging the FCA to implement mandatory reporting and guidance.

• There is a systemic failure among contract-based pension providers to integrate climate risk into their investment policies, often due to a misconception that such factors are merely ethical rather than financially material.
• An evidence-gathering exercise with 12 providers revealed that most lack monitorable climate change policies; only Legal & General was found to have integrated clear timelines, targets, and a proprietary scoring tool for engagement and divestment.
• Providers frequently rely on passive index trackers for default funds—where approximately 90% of defined contribution savers are invested—and use this as a justification for not managing climate risk, despite the availability of climate risk-weighted indices.
• A review of 2017 annual reports showed that Independent Governance Committees (IGCs) are largely failing to oversee climate risk, with only two of 16 reviewed IGCs reporting any information on their providers' approach to the issue.
• The report identifies a regulatory disparity between the Pensions Regulator (TPR), which has issued ESG guidance for trust-based schemes, and the FCA, which has not provided equivalent specific guidance for contract-based schemes.

APA

ClientEarth (2018). Contract-based pensions and climate risk: Report and recommendations to the Financial Conduct Authority. https://www.clientearth.org/media/2zfk5cgs/contract-based-pensions-and-climate-risk-report-and-recommendations-to-the-financial-conduct-authority-coll-en.pdf

Chicago

ClientEarth. Contract-based pensions and climate risk: Report and recommendations to the Financial Conduct Authority. 2018. https://www.clientearth.org/media/2zfk5cgs/contract-based-pensions-and-climate-risk-report-and-recommendations-to-the-financial-conduct-authority-coll-en.pdf.

Wikipedia

{{cite report |author=ClientEarth |title=Contract-based pensions and climate risk: Report and recommendations to the Financial Conduct Authority |date=February 2018 |url=https://www.clientearth.org/media/2zfk5cgs/contract-based-pensions-and-climate-risk-report-and-recommendations-to-the-financial-conduct-authority-coll-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{clientearth2018contractbased, author = {{ClientEarth}}, title = {{Contract-based pensions and climate risk: Report and recommendations to the Financial Conduct Authority}}, institution = {ClientEarth}, year = {2018}, month = feb, url = {https://www.clientearth.org/media/2zfk5cgs/contract-based-pensions-and-climate-risk-report-and-recommendations-to-the-financial-conduct-authority-coll-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }