A stronger focus on systemic risks needed for resilient portfolio returns

New Report identifies the importance of systemic stewardship

7 May 2025

At UKSIF’s Spring Conference in Edinburgh, UKSIF, Scottish Widows and Canbury have published a new report outlining the rationale for an enhanced focus on systemic risk in financial services with a clear framework for action. 

The report – ‘Systemic risks: A framework for portfolio resilience’ – demonstrates the importance of systemic risks, which are frequently not addressed effectively in the market. Systemic risks are un-diversifiable risks that can impact entire markets or economic systems through complex interconnections, potentially triggering chain reactions across multiple sectors and disrupting overall market growth. Such risks include climate change, nature and biodiversity loss, income inequality, artificial intelligence, geopolitics and trade wars.

Eva Cairns, Head of Responsible Investment at Scottish Widows highlights:

“For diversified institutional investors with long time horizons, the report emphasises that overall market growth is the primary driver of investment returns. As such it is vital that systemic risks with wide-ranging impacts across markets are addressed to build more resilient portfolios and also contribute to a more sustainable world for pension savers. To achieve this, we need to engage across the wider system that corporates operate in.”

The report highlights that exposure to overall market performance (beta) is the primary driver of investment returns. As such, for all investors – but especially for diversified institutional investors with long time horizons – it is vital that systemic risk identification, management, and stewardship is practiced across portfolios. However, at present, such risks are not commonly addressed as part of standard asset management approaches to stewardship. By embedding systemic risk management as part of investment objectives and aligning teams, asset owners can enhance portfolio resilience and potentially have a positive impact on sustainability outcomes, too.

James Alexander, Chief Executive of UKSIF said:

“As this new report makes clear, pension funds and other asset owners are amongst the very few truly long-term actors in the economy, meanwhile asset managers’ approaches to systemic risks are often insufficient. To protect long-term returns, it is vital that that the whole industry take systemic risks more seriously and asset owners recalibrate their focus towards these issues.

“This includes engaging with governments, highlighting the impact that systemic issues are likely to have on portfolio values, and considering systemic risk and the development of sustainable markets at all levels of decision-making.”

Notes to Editors

The full report is available here.

This publication has been commissioned by UKSIF and Scottish Widows. UKSIF and Scottish Widows provided input during the development of the research scope and objectives but has not influenced the findings or recommendations.

The research is based on a qualitative analysis combining over 20 interviews, a roundtable discussion, and a literature review. The interviews and roundtable discussion covered key topics including defining systemic risk, challenges in addressing systemic risks, and the roles of different stakeholders. Participants included investment and stewardship experts representing a diversity of asset owners, asset managers, NGOs, consultants, and academia. The literature review examined four main areas: frameworks and background to systemic risk and systems-thinking, evidence of beta and its relationship to portfolio returns, market mis-valuation of systemic risks, and approaches investors are taking or could take to address systemic risks.

About Scottish Widows

Scottish Widows was set up in 1815 to take care of women and children who lost their fathers, brothers and husbands in the Napoleonic Wars, taking its name after the people it was founded to look after. Now more than 200 years on, Scottish Widows look after over 10 million customers across the UK. Today Scottish Widows’ commitment is still the same – to help people plan for their financial futures.

Scottish Widows’ product range includes workplace and individual pensions, annuities, life cover, critical illness, income protection as well as savings and investment products. Customers can access products and services through Independent Financial Advisers, directly, and through all Lloyds Bank, Bank of Scotland and Halifax branches.

About UKSIF

UKSIF exists to bring together the UK’s sustainable finance and investment community and support its members to expand, enhance and promote this key sector. UKSIF’s work drives growth and new opportunities for members as global leaders in the sustainable finance industry.

UKSIF represents a diverse range of financial services firms committed to these aims, and 300+ members, managing over £19trn in assets under management (AUM), include investment managers, pension funds, banks, financial advisers, research providers, NGOs, among others.

UKSIF and its members have been hugely active in, and supportive of, efforts to promote the sustainable finance agenda and worked closely with policymakers and others to find new ways to overcome the barriers to the growth of sustainability and deliver progress towards decarbonisation of the economy.

About Canbury Insights

Canbury Insights is a sustainability consultancy with expertise in stewardship, climate change reporting, environmental science, sustainability, corporate finance, and public policy. Canbury leverages the latest AI technologies to provide clients with a full service of sustainability support – from source data through to client reporting. Canbury takes pride in providing bespoke advice that meets clients’ needs. Canbury works with companies, investors, and NGOs.

10th April March 2025 [London, UK] – UKSIF has released its pensions review, recommending the UK government consider wide-ranging and urgent reforms to the UK’s pensions sector as part of its ongoing Pensions Investment Review.

The report highlights gaps in the current policy and regulatory framework for UK pension schemes and provides recommendations to ensure the UK pensions system can drive long-term, sustainable growth across the country and support a more secure and resilient future for millions of pension savers.

Key findings are that:

1. £3 trillion in UK pension assets represents considerable untapped potential ready to drive sustainable long-term growth
2. Action is needed to address pension adequacy
3. There should be progressive reforms to auto-enrolment
4. Sustainability reporting needs to be updated to be decision-useful and forward looking
5. The regulatory framework must evolve to support long-term, sustainable investing

Click here to read the full press release: UKSIF Pensions Review Press Release April 2025

Click here to read the full report: UKSIF Report: Unlocking Pension Capital for Sustainable Growth

• Global economic exposure to fossil fuel asset stranding risk amounts to $2.28 trillion by 2040
• The UK’s share of this exposure is $141 billion (£113 billion), which equates to around $3,279 (£2,595) per working adult
• $19 billion (£15.2 billion) worth of UK pension funds’ fossil fuel assets is at risk of stranding by 2040, which represents a 13% share of the UK’s total economic loss exposure
• The UK financial system is itself disproportionately exposed to the stranding risk, ranking 9th globally for losses per capita – more exposed than the United States, Italy, and France

6th March 2025 [London, UK] – The UK economy is disproportionately exposed to stranded fossil fuel assets, with potential losses for UK pension savers reaching tens of billions of pounds by 2040, according to a new report from the UK Sustainable Investment and Finance Association (UKSIF) in collaboration with Transition Risk Exeter (Trex).

Their analysis traces the complex web of financial ownership of fossil fuel assets and tracks the exposure of end beneficiaries – such as individual investors, pension funds and governments – to the risk of these assets becoming ‘stranded’. This refers to oil, gas and coal reserves, along with associated infrastructure and investments, that lose economic viability before their expected operational lifetimes as a result of climate policies, technological changes, or shifting market conditions.

Based on current green transition policies, mid-term action plans to cut emissions, and long-term net zero targets, the report finds that global economic exposure to fossil fuel asset stranding risk amounts to $2.28 trillion by 2040 – of which the UK’s exposure is calculated at $141 billion.  In comparison to the cost of climate inaction, this is still a much smaller loss to bear. In a warming scenario between 2.5°C and 2.9°C, climate-intensified natural disasters may lead to $12.5 trillion in economic losses by 2050.

Click here to read the full press release: UKSIF Stranded Fossil Fuel Assets Press Release

Click here to read the full report: UKSIF Stranded Assets Report

Read the full press release here: UKSIF Stewardship Code Press Release 19-02-25

[19^th February 2025, London. UK.] The UK Sustainable Investment and Finance Association (UKSIF) has today submitted their response to the Financial Reporting Council (FRC)’s consultation on their review of the UK Stewardship Code.

UKSIF emphasises the importance of the Stewardship Code and its role in helping UK investors to establish a leading standard globally for good stewardship.

Key recommendations summarised from the response include:

• Proposed alternative definition of ‘stewardship’ in the Code in contrast to the FRC’s current consultation proposals, supported by the Pensions and Lifetime Savings Association (PLSA) and a number of UKSIF’s members: “Stewardship is the responsible allocation, management and oversight of capital, having regard to dependencies and impacts on the economy, the environment and society, to create long-term sustainable value for clients and beneficiaries”.
• Supporting language to the ‘stewardship’ definition should give consideration to the Financial Markets Law Committee (FMLC) opinion published last year, to clarify that stewardship is consistent and aligned to the fiduciary duties of investors.
• To address concerns about the reporting burden presented by the existing UK Code, the submission and assessment of the ‘Policy and Context’ (‘Part A’) disclosures should take place on a triennial basis in place of the proposed frequency outlined in the consultation.

Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at UKSIF commented: “The UK Stewardship Code has been instrumental in driving more transparent and effective stewardship activities across the investment industry, helping create long-term value for clients while establishing a global standard for stewardship and responsible investment practice. As we mark five years since the  introduction of the 2020 Code, we urge the FRC to maintain the fundamental purpose of this important, internationally leading framework.

It is particularly essential that the finalised ‘stewardship’ definition is not perceived to dilute the Code’s purpose as a high-quality benchmark for investor stewardship and engagement. It should still signal the importance of signatories considering the wider economic, environmental and social systems in which they exist, while also addressing concerns with the current definition’s causal links implied between stewardship and real-world outcomes. We are optimistic our proposals for an ‘alternative’ definition could strike the right balance here, by reflecting the needs of different market participants and investment approaches and maintaining the Code’s overall ambition.”

Readers can find the full consultation response on the UKSIF Policy Page.

Read the full press release here: UKSIF Stewardship Code Press Release 19-02-25

London, 10th December 2025.– The UK Sustainable Investment and Finance Association (UKSIF) has today released our 2025 look ahead highlighting 5 key trends coming down the track next year.

Your can read them in detail alongside commentary from our CEO James Alexander here:

UKSIF Perspectives – 2025 Outlook

The key milestones, updates and trends highlighted are:

1. Energy transition picks up pace in the UK.

2. Pensions reform and consolidation

3. Election of Donald Trump reconfigures the flow of sustainable investment.

4. The FCA’s sustainability labels (SDR) will continue to be a key theme occupying FS professionals.

5. ISSB adoption and hopes here for renewed momentum in UK

You can find out more, or reach our press team by emailing Media@uksif.org

Read the report here

London UK., November 14, 2024 – As investors and international policy makers gather at COP29, The Global Sustainable Investment Alliance (GSIA) released its report Transforming Global Finance for Climate Action: Addressing Misaligned Incentives and Unlocking Opportunities. In addition to offering specific recommendations to the policymakers at COP29, the report identifies barriers to sustainable investment and the actions needed to encourage the flow of capital to the projects needed to address climate change.

Dubbed the ‘Finance COP’, COP 29 is expected to see a new climate finance goal dominate headlines, but GSIA have identified systemic misalignment keeping private investment and policy making out of step. National plans currently fall far short of what is needed, and significant private finance must be mobilized to avoid climate disaster. GSIA have set out a systems-change approach to aid the financing of that change, with academics from the University of Tokyo, Columbia University, London School of Economics, and investment professionals from World Bank Group, PRI, Berkeley Law and others contributing to the report’s findings.

“Investor and policymakers’ incentives are misaligned,” said James Alexander, CEO of UKSIF and Chair of GSIA. “At COP 29, policymakers, investors and civil society negotiators can help address the key barriers to meaningful and actionable change. We need supportive policy action to align incentives and catalyse capital to unlock the opportunities that a climate transition presents.”

The report groups incentive barriers into five categories, which GSIA has called the PIVOT framework:

• Policy vacuum – Policies can act as barriers that prevent investment from flowing to the climate crisis. At the same time, there is a lack of positive policies that encourage climate-positive investments.
• Interest – Companies and investors may focus on quick wins for near-term financial return or sustainability, ignoring long-term goals (e.g. net-zero by 2050). This short-term thinking prevents investments in sustainable projects and innovations to meet climate targets.
• Valuation – Environmental and social factors are traditionally not accounted for in financial models causing money to flow into environmentally harmful industries as “hidden costs” aren’t considered. A short-term focus on financial reporting can further undermine long-term value creation.
• Ownership – Some institutions and investments are managed without active involvement. A hands-off approach, whether due to cultural or structural challenges, means redirecting capital is difficult, and met with resistance from the current system.
• Transition misalignment – Certain business models and industries naturally conflict with the goals of the energy transition, making it challenging to create and put into action long-term plans that include these sectors.

Read the press release here

Read the report here

About Global Sustainable Investment Alliance (GSIA)

GSIA is a global collaboration of sustainable investment membership-based organisations, aiming to unlock the power of the worldwide financial services industry to drive leadership, achieve a substantial impact on key global challenges, and accelerate the transition to a sustainable future.

GSIA simultaneously works to enhance the synergies between members, participate in global initiatives, and provide advice and support to local and regional sustainable investment organisations as they establish and grow.

GSIA’s members are drawn from Europe, Asia-Pacific and North America. Collectively GSIA’s members represent the mainstream of global finance and investment, managing tens of trillions of dollars in assets. GSIA members include Eurosif (European Sustainable Investment Forum), Japan SIF (Japan Sustainable Investment Forum), RIAA (Responsible Investment Association Australasia), RIA Canada (Responsible Investment Association Canada), UKSIF (UK Sustainable Investment and Finance Association), US SIF (The US Sustainable Investment Forum).

About UKSIF

The UK Sustainable Investment and Finance Association (UKSIF) is the member organisation for sustainable investment in the UK, with over 320 members collectively managing £19tn in global assets. Members include investment managers, pension funds, banks, financial advisers, research providers, NGOs, among others.

How To Talk To Your Clients About Sustainability

[Thursday 17th October 2024] UKSIF has today released a member guide called ‘How to Talk to Your Clients About Sustainability’ which aims to share the results of research done into public understanding of various terms around sustainable investing. The guide aims to respond to the frequently encountered challenge of low end-investor awareness of the options available and the meaning of industry terms like ESG, Responsible Investing, and Impact Investing.

‘How to Talk to Your Clients About Sustainability’ sets out the case for a renewed public and client-education drive to better inform savers of the sustainable savings and pensions options available to them so that they can make informed choices. The guide provides an overview of extensive polling conducted by UKSIF in 2024 to gauge the sentiments of pensions and savings-holders in the UK towards the principles of sustainable investing. It also aims to recognise the politicised context that sustainability has come to exist in and to recommend ways for members to articulate the financial materiality of long-term considerations that might affect the performance of their portfolios like nature loss, labour laws, and climate change.

Finally, the guide provides recommendations designed to assist firms in developing their client-facing messaging on sustainability, and sets out plainly the public appetite for information on the sustainability credentials of pensions and savings options.

UKSIF has today published their scorecard analysing actions introduced by Keir Starmer’s Labour Party in their first 100 days of government.

This document presents UKSIF’s view on the progress made by the new UK government in their first 100 days in office. We separate our analysis into areas of positive progress, areas where more work is needed and finally, missed opportunities. We continue to work with the government to highlight our views on the pathway towards becoming the world’s leading sustainable economy.

The UKSIF Scorecard- Labour’s first 100 days

Progress to date has been rapid and impressive, especially towards decarbonising our energy grid. Much remains to be done and progress must not slip. The government should seize on the opportunity presented by the upcoming budget and COP29 to set out a clear vision to get investors behind them.

Read full press release here

• Wind and solar energy were highlighted as the most likely energy sources to lower household bills (49% and 43% respectively)
• Significantly fewer ex-Conservative voters thought increased oil and gas production would bring down energy bills (16% and 27% respectively)
• Wind and solar power scored joint-highest for growth. 73% of ex-Conservatives identified wind and solar energy (separately) as likely to generate economic growth, compared to 46% for oil and 53% for gas.
• One third (36%) say transition progress stalled under Rishi Sunak because government failed to ‘grasp growth opportunities’.
• Tom Tugendhat ranked as the top potential Conservative Party leader who would be “good for the climate”, but no candidate scored higher than 5 out of 10.
• Over a third (35%) of ex-conservative voters say they would be likely to return to the Conservatives if climate record improved, compared to just 17% who said they would be less likely.

London, 1st October 2024 – The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300+ members managing over £19 trillion in global assets under management (AUM), has today released polling results of 1000+ ex-Conservative swing voters, revealing their sentiments on the UK’s green trajectory, following the recent UK general election held on 4^th July 2024.

Lowering energy bills

UKSIF’s poll of ex-Conservative swing voters shows increased confidence in the role renewable energy can play in reducing energy costs. Asked to select their top two most likely energy sources to reduce household energy bills, just under half of respondents (49%) chose wind power, followed by solar energy at 43%.  Comparatively, oil and gas achieved only 16% and 27% of votes.

These results come just two months after Ofgem increased the energy price cap by 10% in England, Scotland and Wales.[1] A typical dual-fuel, direct debit household using a typical amount of energy, external is predicted to pay £1,717 per year for energy supply, a rise of £149.

[1] Ofgem: Changes to energy price cap between 1 October to 31 December 2024

Press Release UKSIF on exConservative swing voters sentiment polling Sept 2024

On the 3rd of September, the UK government announced 131 new energy ‘Contracts for Difference’ (CfD) in solar, wind and tidal energy had been awarded as a result of the annual auction. James Alexander, CEO of UKSIF comments:

“The success of AR6 in securing record private investment into the UK’s clean power stands in contrast to the failure of the last auction round, at which no private companies bid. This shows the UK has turned a corner, and momentum is building behind the green transition again. The British public, especially energy bill payers, will reap the benefits of government, companies and investors working together to drive private finance into one of the UK’s biggest future growth prospects: our clean power industries.

Big challenges remain. The government must urgently turn its attention towards enabling technologies like battery storage, and building out the grid to enable more clean power to get where it is needed.“