People’s Pension Updates Climate Approach

People’s Pension¹, the largest commercial master trust pension scheme in the UK, has today unveiled an updated climate approach² based on real-word evidence, and designed to align with long-term investment outcomes for its seven million members.

The objective behind the £40 billion Scheme’s decision is to manage climate transition risks to asset values. This will be implemented with a bottom-up approach to reflect differences across markets, asset classes and sectors. This means target-setting will also be considered on a case-by case basis. The Scheme will continue to have a net zero ambition that is aligned with the Paris Agreement.

Global emissions have not moved in a way that is on track to limiting warming to 1.5 degrees, and much of the policy action anticipated five years ago, that the Paris alignment was designed to mitigate the risk of, has not materialised. Additionally, the Scheme recognises that the business case for a low carbon transition has been variable across regions and sectors.

This means People’s Pension has moved away from a singular, top-down ‘1.5°C aligned portfolio’ (limited to no overshoot) target as an investment constraint, emphasising practical, evidence‑based action rather than theoretical scenarios or unrealistic expectations of portfolio decarbonisation. People’s Pension has found that maintaining portfolio targets that are inconsistent with the real world could significantly increase levels of risk with little real benefit.

Addressing climate risks and opportunities in portfolio construction will remain a priority for People’s Pension, based on valuation discipline and risk control, rather than positioning that places too strong an emphasis on climate policy materialising. It will investigate the benefits of an investment strategy of favouring transition leaders within carbon-intensive sectors where fundamentals, valuations and evidence support its investment objectives.

Recognising that global emissions reductions will be driven by companies, policymakers, and the broader economy, and not solely capital reallocation by investors, People’s Pension remains committed to a systemic stewardship-led strategy aimed at supporting the transition while protecting members’ retirement savings. Central to this approach is a strong focus on industry and policy engagement³, where efforts can deliver the greatest impact to its members for the resources deployed. 

In developing this revised positioning, People’s Partnership commissioned sustainable investment specialists Canbury to conduct a comprehensive literature review, spanning both supportive and challenging opinions, as well as soliciting views from leading academics in the field.

Dan Mikulskis, Chief Investment Officer of People’s Partnership, provider of People’s Pension, said: 

“This updated approach demonstrates a robust evidence-based process to support climate action that is grounded in a clear objective: to protect and grow our members’ savings. Our industry understanding on how to do this effectively has materially changed since we set our original portfolio-level target  in 2019, and we have a fiduciary responsibility to evolve and adapt to those developments. Additionally, there is seven years of evidence on market-wide decarbonisation and policy change that we believe needs to be adapted to. We believe the retention of a Paris-aligned ambition is important, but it must be rooted in bottom-up realities as to the role that investors can play in achieving it to ensure better outcomes for our members”.     

Mark Condron, Chair of People’s Pension Trustee Board, said:  

“We remain firm that climate change is a significant long-term financial risk, but that misaligned, or overly ambitious climate strategies can also harm our members if they rely on optimistic assumptions about the speed or nature of transition. Our updated climate approach makes this explicit, and we believe being robustly transparent about this, both to our members and the wider market, is critical. By grounding our approach in real world evidence, we can back a credible transition while safeguarding the retirement outcomes our members rely on.”