COP30: How does it apply to pension schemes?
As global leaders gather in Brazil for COP30, the urgency of climate action is once again in the spotlight. Here, pension schemes have a powerful opportunity to drive real-world change. With trillions of pounds under management, UK pension funds are uniquely positioned to influence the transition to a sustainable economy; through the assets they hold, the companies they engage with, and the risks they manage.
COP30’s agenda is built around six key pillars from energy and transport to biodiversity and human development. These themes offer a practical framework for trustees and pension managers to assess how sustainability intersects with long-term financial security. But how does each pillar connect to pension scheme strategy, and what actions can schemes take today to create a more sustainable future?
Energy, Industry & Transport:
These elements contribute heavily to global emissions. But there are opportunities here for sustainable investments too. As companies and countries commit to moving to net-zero emissions targets, trustees and their investment managers may see investments in renewable energy infrastructure, green bonds, or low-carbon transport companies as prudent ways to diversify their scheme’s portfolios. 86% of respondents to Schroders’ 2025 Global Investor Insights Survey intend to allocate money to the energy transition in the next 12 months. 77% highlighted its appeal due to long-term return potential ideal for Defined Contribution (DC) schemes or Defined Benefit (DB) schemes with run-on strategies.
Forests, Oceans & Biodiversity:
Increasingly, we’re seeing opportunities for pension schemes to invest in environmental, social and governance (ESG) tilted funds and commitment from these funds to measure their climate impact. COP30’s focus on forests, oceans and biodiversity is well-served by dedicated biodiversity funds that align with the UN’s Sustainable Development Goals. This 2022-2023 example from Federated Hermes shows how their investments led to 50.5 million metric tons of carbon dioxide being avoided and 38.2 million megawatt hours of clean energy being generated, making it easy for investors to see the good work their money has done.
Agriculture & Food Systems:
My colleague Nick‘s written previously about how good agricultural investments prevent climate change and nature loss by nurturing biodiversity and creating carbon sinks. Particularly, investment in regenerative farming techniques over traditional methods that wear out land and cause water scarcity is good for the planet and good for potential member returns too. The upfront costs of transition can be high, but examples like the South Yorkshire Pension Authority’s (SYPA) 25,000-acre farmland holdings show how long-held assets can be adapted to generate sustainable returns long into the future.
Cities, Infrastructure & Water:
The NEST master trust (which controls nearly £50 billion in assets) has had a climate aware strategy as its default fund since 2017. Now they, alongside other pension arrangements and annuity providers, are investing in projects to modernise Britain’s water infrastructure like the Haweswater Aqueduct Resilience Programme. The programme will modernise pipelines in Cumbria, Lancashire and Greater Manchester and shows how pension schemes can support one of COP30’s pillars locally. Investments like these can offer pension scheme members returns in the long-term whilst supporting the critical services they rely on.
Human & Social Development:
In this way, water infrastructure investment also contributes to COP30’s human and social development pillar. However, for pension schemes seeking investments that support this pillar differently, social housing funds could be an option. Research from L&G suggests that 20% of DC pension savers who don’t own a home feel they will never do so, highlighting both the need for and the opportunity in investing in this asset class. Their Affordable Housing Fund (and others like it) is ‘dedicated to the development of high quality, sustainable affordable housing’ and offers pension schemes the opportunity to diversify their portfolio whilst supporting another COP30 pillar.
Global Stocktake:
The UN defines its global stocktake as ‘a process for countries and stakeholders to see where they’re collectively making progress towards meeting the goals of the Paris Climate Change Agreement.’ Perhaps it’s a reminder for pension schemes to look at their investments and assess their climate opportunities and risks.
COP30 reminds us that climate action is everyone’s responsibility. Pension schemes have a unique opportunity to drive change through capital allocation, stewardship, and governance. Trustees should review their investment strategy, update their risk register, and engage members on sustainability. The time to act is now.
