Climate change transparency by ethically responsible European pension funds:contractual issues and agency challenges

European pension funds play an increasingly significant societal-wide stewardship role<br/>both by providing retirement income for ageing populations and in securing public<br/>policy targets related to the green transition through engaging in net zero investment<br/>policies and climate friendly risk management strategies. In contrast with legitimacy<br/>and stewardship explanations of socio-environmental accountability issues,<br/>stewardship theory implies that organisational managers instead care about societal<br/>wide issues concerning environmental accountability. This paper argues that European<br/>pension funds, as increasingly influential institutional investors, face additional<br/>incentives to adopt a more nuanced “trusteeship” accountability to their beneficiaries<br/>by going beyond making generic ESG commitments to provide more specific public<br/>climate change transparency. We examine the degree of alignment with the Task<br/>Force for Climate-Related Financial Disclosure (TCFD) recommendations in publicly<br/>available climate reports of a sample of fifty globally large European pension fund<br/>organisations that dominate the investment industries in four European countries which<br/>mandate retirement savings via pension funds. We predict and find that the degree of<br/>public climate change transparency is related to the extent of delegation of investment<br/>management and monitoring to outside professional organisations and the governance<br/>structure, the separation of ownership and control of non-occupational based pension<br/>funds. Our conclusions are in line with a trustee theory which explains how pension<br/>funds face special contractual, and agency features which influence public<br/>transparency about how they deal with climate change.