Paris Alignment Forum All-Stakeholder Events
The Paris Alignment Forum runs quarterly events which are open to all members. In this, our fourth event of the year, we were delighted to welcome Tom Rhodes and Mel Jarman, from the Department of Work and Pensions (DWP), to outline the Climate and Investment Reporting Consultation. The ensuing industry-wide discussion, with pension funds, trustees, asset managers, consultants, and climate specialists, was one of our most lively discussions to date.
DWP Climate and Investment Reporting Consultation
Tom Rhodes, Mel Jarman
Tom Rhodes, Policy Advisor at the DWP, worked on the DWPs climate clauses in the Pension Schemes Act 2021 and the original climate change governance and reporting clauses which came into force on 1 October this year. He started the keynote address by outlining the DWP’s consultation around climate metrics and in particular the introduction of a fourth climate metric. (A copy of the presentation can be found here.)
Summary of key points made:
Mel Jarman, who leads on stewardship in the DWP’s Climate Change and Responsible Investment Team, continued the keynote addressing the Stewardship aspects of the DWP consultation. She covered the following topics:
Summary of key points made:
The Q&A session picked up on questions that were raised in the “chat” as Tom and Mel were speaking. Some of the themes that were covered are outlined below:
Breakout room discussions
Our sponsors Invesco and Redington hosted six small-group breakout discussions. The discussions included asset owners, consultants and asset manager representatives and provided a great opportunity to share experience and engage in vigorous debate. Discussions focussed round three questions:
What thoughts do you have on the proposed definition of a portfolio alignment metric?
Participants described this discussion variously as “lively” and “passionate”. There was general support for an alignment metric and a general sense of urgency to accelerate de-carbonisation of economies.
The debate focussed around whether the metric should be 1.5°C aligned or above. Those in favour of a 1.5°C aligned metric argued that this is in line with policy intention and ambition is needed rather than timidity. Reservations included the misalignment with real-world scenarios. This might create a tension between real world investment opportunities and alignment which may in turn distort investment portfolios and impact member outcomes. Furthermore, concern was raised around the behavioural aspects. How will missed alignment be communicated to members and will Trustees feel compelled to take knee-jerk reactions (e.g., disinvesting from carbon intensive but economically important sectors)?
Do you have any comments on the proposal that the SIP and Implementation Statements should be trustees’ statements, not a statement drawn up by their consultant?
There was a sense amongst participants that many of these statements had become compliance focussed. Questions were raised around the level of membership engagement in the statements (and indeed whether they are targeted for members). In practice, many trustees need to rely on their consultants to produce their statement, but this can lead to a “boilerplate” approach. Suggestions were put forward for improving the efficiency of reporting from asset managers, for example introducing a standard data template.
Do you have any comments on the proposal that trustees should be able to include material from voluntary disclosures, eg Stewardship Code reporting
A common theme discussed was the level of administration and governance around reporting. In some cases, the reporting overlaps (e.g. Climate reporting, UK stewardship code and UNPRI) so attempts to streamline and improve the level of communication were welcomed by participants.
Would you like to join future events?
The Paris Alignment Forum hosts a range of events including online interactive training; afternoon tea discussions; Chatham House asset-owner discussions as well as the quarterly all-stakeholder meeting.
Please see the Paris Alignment Forum Home Page for details of future events.