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The Actuary The magazine of the Institute & Faculty of Actuaries

Pensions industry braced for petrol and diesel car ban

UK prime minister Boris Johnson has today announced that a ban on new petrol, diesel and hybrid car sales will be brought forward from 2040 to 2035 at the latest.

2035 petrol car ban announced ©iStock
2035 petrol car ban announced ©iStock

Speaking at the London Science Museum this morning, Johnson said that the ban, subject to consultation, would be brought forward even earlier if feasibly possible.

This is likely to create a “ripple effect” across the pensions and asset management community, according to Hymans Robertson actuarial consultant, Amy Sutherland.

She warned that pension trustees who fail to align with the transition to a low-carbon economy could see their returns suffer, and that today is just the start of a “very long" journey.

"This commitment today, and the more stringent measures we expect to see in coming years, will really hold trustees both responsible and accountable for where scheme assets are invested," she continued.

“We will start to see the lack of adaptability to a low-carbon world impact returns far more than stubbornly remaining in less than favourable funds and industries.

“In terms of asset managers themselves, some are seen to be falling behind others in terms of climate awareness, and announcements like today’s will start to weed out those whose promises are empty words."

The ban is just one of eight “inevitable” policies forecast by the UN-backed Principles for Responsible Investment (PRI) as the public demands action on climate change.

Others include coal phase-outs, carbon capture and storage for industry, and agricultural shifts, with the policies forecast to wipe up to $2.3trn (£1.8trn) off company values by 2025.

Regulations were introduced last October to ensure private pension schemes consider climate risks when making investments, however, these are seen by some as a tick-box exercise.

Sutherland said that there is still a lot of work to do to ensure that available investments are ready for the move to a greener future, but that investors need to prepare now.

“We urge trustees, their advisers and asset managers to all get climate risk on the agenda immediately and consider both the mitigating and preventative actions that they need to be taking now to ensure they are prepared for the global swing we expect to come shortly," she added.

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