No more excuses

”I wanna feel sunlight on my face. I see the dust-cloud Disappear without a trace. I wanna take shelter From the poison rain Where the streets have no name Where the streets have no name Where the streets have no name. We're still building and burning down love Burning down love. And when I go there I go there with you (It's all I can do). The city's a flood, and our love turns to rust. We're beaten and blown by the wind Trampled in dust. I'll show you a place High on a desert plain Where the streets have no name”

"Where the streets have no name”, a song by U2 from their 1987 album, the Joshua Tree. The idea of finding a higher plain is my challenge to allocators and asset owners!

Over the last several months, following a couple of super interesting pieces from Dr Roger Iles , I've enjoyed making a few points that some readers may have found provocative:

the discount rate debate may have been the wrong fight (already won!)

the truncation of evaluation horizons actually does more damage than the choice of rate itself

topping that, the universal owner reframing is a more demanding approach for large allocators, but most institutions aren't quite ready for it.

The standard pushback to all of these runs along all too familiar lines. Adjusting discount rates for nature-related assets has no institutional precedent. Extending evaluation windows beyond standard practice violates benchmarking conventions. Reframing portfolios around universal owner principles isn't compatible with fiduciary duty as currently interpreted. These are reasonable objections, and they explain why the industry has moved so slowly even as the intellectual case has arguably hardened considerably (and the physical evidence mounts).

Two other developments in the last twelve months have, I think, quietly demolished most of these objections. They haven't been connected in the trade press, and I'm not aware of anyone making the argument that they fit together. But I honestly think that they do fit together, and the implications for asset allocation could be quite substantial.

The Green Book change

The first is a change to HM Treasury's Green Book, the guidance document that governs how the UK government appraises public spending. The 2026 update introduces a new requirement for long-horizon projects. If your appraisal runs beyond fifty years, you must now rerun the economic analysis using an alternative discount rate schedule that removes pure time preference, alongside the standard rates. Both sets of results have to be reported, so decision-makers can see how much the conclusions depend on the choice of discount rate.

The mechanics are worth understanding. Standard Green Book discounting starts at 3.5% for the first thirty years and declines in steps to 1.0% beyond year 300. The new sensitivity schedule sits below this, 3.0% for years 0 to 30, declining in steps to 0.86% beyond year 300. The difference looks small at the start, but it compounds into something significant for projects whose benefits sit in the long tail.

The rationale, drawn explicitly from Lord Stern's 2006 Review, is that positive pure time preference is not ethically defensible when applied to large, irreversible welfare transfers from the future to the present. The Treasury has not abandoned the standard rates, but it has accepted, in mandatory parallel calculation, that the ethical objection to pure time preference has substantial force for long-horizon decisions.

This is a meaningful institutional move. For nearly twenty years the Treasury has resisted the Stern reasoning. The 2021 Green Book update declined to follow it. The 2026 update doesn't go all the way either, but it builds the Stern objection into the appraisal architecture as a mandatory sensitivity test. Climate adaptation projects, nature-based solutions, infrastructure with hundred-year design lives, these will now show materially higher NPVs under the sensitivity schedule than under the standard rates. The implications for project ranking, particularly for nature-related investment, are not trivial.

The Cushon fiduciary opinion

The second development is a March 2025 legal opinion produced by NatWest Cushon in partnership with Eversheds Sutherland. The opinion argues that pension trustees can, and should, consider a member's long-term standard of living in retirement when interpreting their fiduciary duty, not just the size of the cash pot at the point of retirement.

The argument, as I understand it, runs roughly as follows. Fiduciary duty to act in beneficiaries' best interests has historically been interpreted in strictly narrow financial terms - trustees should maximise risk-adjusted returns and avoid considerations that would dilute this objective. But this interpretation implicitly depends on an assumption that the economic and physical world beneficiaries retire into is held constant. A larger pension pot in a degraded economy, with destabilised infrastructure, weakened healthcare systems, and accumulating climate risks, may not actually deliver a higher standard of living than a smaller pot in a functioning one. The narrow interpretation of best interests breaks down when the systemic context is variable.

The opinion therefore concludes that trustees can legitimately consider factors like the long-term resilience of the economic system, investments that support UK infrastructure and growth, and sustainability projects whose benefits compound over decades. I don't believe that this represents a departure from fiduciary duty, but rather a more complete implementation of it.

The Pensions Minister (PB = pre-Burnham!), Torsten Bell, has publicly supported this broader interpretation. The Impact Investing Institute has been promoting it too. Industry commentary has even been cautiously positive. But let's be honest, this is not yet established case law, even if it is a legal opinion from a respected commercial firm, supported by a major master trust, endorsed by the responsible minister, and consistent with the direction of regulatory thinking on sustainability disclosure. The institutional weight behind it seems real, but not yet acted upon.

Why these two developments fit together

I want to be careful not to overclaim the connection, because each development arose from its own institutional logic and they weren't coordinated. But I want to contend that they are, in effect, two halves of the same argument arriving from different directions.

The Green Book change addresses a methodological question: should public appraisal use a single discount rate that bakes in positive pure time preference, or should it test what the analysis looks like without that assumption? The Treasury has concluded the parallel calculation is necessary for long-horizon decisions. The Cushon opinion addresses a governance question: should trustee fiduciary duty be interpreted narrowly in terms of cash pot maximisation, or should it accommodate the long-term systemic context that determines what the pot is actually worth? The legal interpretation has concluded the broader reading is defensible and probably required.

These are the same question seen from different angles, and in essence come down to whether long-horizon analysis is something institutions can legitimately engage with, given the methodological and fiduciary frameworks they operate under. For most of the last two decades, the practical answer in private finance has been "no, our frameworks don't permit it". Both developments move a key piece of that answer forwards tho.

The Green Book change establishes institutional precedent - the Treasury, the most methodologically conservative appraisal body in the country, has now built the Stern-style sensitivity test into its standard guidance. So surely an asset owner who says "we can't adjust our discount rate logic for long-horizon nature-related assets because nobody serious does that" is no longer accurate? The most serious appraiser in the country now does. The Cushon opinion establishes legal cover - the standard objection that trustees cannot consider long-term systemic factors without violating fiduciary duty has been formally challenged by a credible legal interpretation arguing the narrow reading is itself the violation. Trustees who want to take long-horizon systemic risks seriously now have a reasoned legal position to point to.

Why these things are happening now

It's worth pausing on this question, because I don't think that the timing is accidental. Both developments emerged in a specific institutional moment, and understanding the moment helps explain both why they happened when they did and why the response from the asset management industry has been so muted. After all, we live in a time of a National Emergency Briefing .

The most immediate driver is the UK government's productive finance agenda. The Mansion House Compact, signed in July 2023 by the then Chancellor, committed major DC pension providers to allocate at least 5% of default funds to unlisted equities by 2030. The political logic was straightforward: UK pension capital has been flowing predominantly into liquid, listed, often overseas assets, while domestic productive investment has been starved of long-term capital. The government wanted to unlock that capital for infrastructure, growth equity, and sustainability projects, but the standard interpretation of fiduciary duty was being cited by trustees and consultants as a constraint on doing so. The Cushon opinion responds to that constraint directly, and the broader interpretation of fiduciary duty is, among other things, the legal architecture the Mansion House agenda needs to function.

The Cushon opinion is intellectually serious and the underlying argument has been gathering academic and regulatory support for years. But the reason it gets airtime now, and the reason a sitting Pensions Minister is willing to endorse it publicly, is that it solves a problem the government urgently needs solved. The legal interpretation and the policy agenda are mutually reinforcing.

The second driver is the slow accumulation of regulatory work on sustainability disclosure. TCFD became mandatory for large UK asset managers and pension schemes in 2022. TNFD published its recommendations in 2023. The NGFS has been pushing nature-related scenario analysis since the same period. None of these frameworks force allocators to act on the risks they disclose. But they do force allocators to measure them, document them, and report on them. Once a risk is measured, documented, and reported, the question of why the institution is not acting on it becomes harder to deflect. The disclosure regimes have, slowly and probably unintentionally, created the conditions under which broader fiduciary interpretation becomes necessary. You simply cannot indefinitely disclose a material risk you are not addressing without somebody asking "why?"!

The third driver may be the growing litigation pipeline. Climate-related litigation against pension funds has been building for several years, most prominently in the cases brought by ClientEarth and similar organisations against trustees who failed to consider climate transition risks. The cases that have proceeded have not all succeeded, but they have established that trustees can face legal challenge for ignoring systemic risks. This inverts the historical risk calculation. The defensive position for a trustee used to be narrow interpretation of fiduciary duty, stick to financial-pot maximisation, avoid anything that could be characterised as departing from it. The defensive position is now more complicated, nuanced if you like. Trustees can be challenged for considering systemic factors, but they can also be challenged for ignoring them. The legal exposure has become two-sided, and the safe position is no longer obvious.

A fourth driver is the actuarial work that the Institute and Faculty of Actuaries has been producing, particularly the Planetary Solvency report series. Actuaries occupy an unusual professional position, in that they are required by their code of conduct to consider long-term risks to the financial systems they advise on. They have direct influence over pension fund decision-making through scheme actuary roles. And they have been producing increasingly stark assessments of long-horizon climate and nature risks since 2023. The 2026 Planetary Solvency report effectively states, in the language of formal risk management, that current institutional practice is operating outside any reasonable risk appetite. This professional framing has been quietly important, and it now gives trustees and CIOs a technical vocabulary for concerns they might otherwise have struggled to articulate within their existing governance structures.

The fifth driver is generational, and it tends to get understated in industry conversations because it doesn't fit neatly into financial analysis. Pension fund membership is shifting, with younger members increasingly vocal about where their money goes, increasingly willing to challenge trustees on sustainability questions, and increasingly likely to switch providers based on these considerations. Master trusts are particularly exposed to this dynamic because they compete for membership. NatWest Cushon is a master trust. The commercial logic of being seen to lead on broader fiduciary interpretation is not separable from the commercial logic of attracting and retaining younger members.

The sixth driver (which I'll mention briefly because it's the one most often overlooked) is the physical materialisation of climate and nature risks in ways that are becoming impossible to ignore. The IFoA report opens with a litany of 2025 events: California wildfires, Texas floods, European heatwaves, Pakistani flash floods, Turkish wildfires, Bangladeshi cyclones. Now we're living in a world that is literally burning. The cumulative effect of these events on insurance markets, public infrastructure, and political stability has been substantial. The argument that long-horizon systemic risks are speculative is harder to sustain in 2026 than it was even three years ago - the risks are not speculative. They are unfolding, and they are visible in the financial statements of institutions that previously treated them as someone else's problem.

What I want to draw out is that none of these drivers individually would have been sufficient to produce the two developments we've been discussing. The combination is what matters: the productive finance agenda gave the government a reason to want broader fiduciary interpretation, and the disclosure regimes gave trustees a reason to think harder about what they were measuring. The litigation pipeline made the defensive logic of narrow interpretation untenable, while the actuarial work gave professional cover for taking systemic risks seriously, and the generational shift gave commercial logic to leading on these questions. And finally the physical materialisation of climate and nature risks made the whole framing feel less academic.

The institutional moment is genuine, but it is also fragile. If the political weather changes, if a different government takes a different view of pension reform, if a couple of high-profile cases run the other way, the institutional cover I'm describing could weaken. The argument I made earlier about the cover for inaction having disappeared is true at this moment, but it may not stay so forever. Allocators who want to act on the developments I've described probably have a window of perhaps five to ten years to do so before the institutional context shifts again.

What this changes for asset allocation

Its important to be specific about what these developments imply in practice, because the temptation with arguments like these is to voice them at a level of abstraction that doesn't translate into anything an investment committee can actually do on Monday morning. So the most immediate implication is that the parallel appraisal track I pointed at in the second piece is now institutionally defensible in a way it wasn't twelve months ago. For nature-related and climate-related assets with long-tail cash flows, an investment committee can now legitimately commission an analysis that runs the standard appraisal alongside a sensitivity test using lower discount rates and longer horizons, explicitly modelled on the Green Book mechanism. The committee isn't required to act on the sensitivity test - it just has to look at it. That mirrors what the Treasury now requires of its own appraisers, and it makes the assumption that the long tail doesn't matter visible rather than buried.

The second implication is that the universal owner framing, which I argued was probably a decade-long institutional project, now has substantial legal underpinning that it didn't have a year ago. The Cushon opinion is explicitly compatible with the universal owner argument that systemic risks affecting the entire portfolio cannot be diversified away and must therefore be addressed at the systemic level. This doesn't make the universal owner framework operational overnight, but it does mean that trustees who want to move toward it are now standing on firmer legal ground than they were before.

The third implication is more uncomfortable and potentially tricksy. If the Treasury now requires its own appraisers to test sensitivity to pure time preference, and the legal interpretation of trustee duty now permits, and arguably requires, consideration of long-term systemic factors, then the question of why private allocators are not doing equivalent analysis becomes harder to deflect. The standard excuses are gone, and what remains is institutional inertia, benchmarking culture, and the discomfort of confronting assumptions that have been buried in methodology for decades.

The question that won't go away

Here we are! The intellectual case for taking long-horizon systemic factors seriously in financial appraisal has been gathering force for nearly twenty years. The institutional cover for not doing so, "the methodology doesn't permit it", "fiduciary duty doesn't allow it", has been working its way out of the system over the last few years. The 2024 Drupp paper closed the theoretical loop on ecosystem service valuation. The 2026 Green Book change builds the Stern objection into Treasury practice. The 2025 Cushon opinion broadens fiduciary duty in a way that accommodates systemic thinking. The Planetary Solvency work by the IFoA gives long-term systemic risks a clear actuarial framing.

What's left is the question of whether the asset management industry will follow. There is now, as far as I can tell, no remaining methodological or legal obstacle to private allocators adopting a parallel appraisal track for long-horizon nature-exposed assets. The Treasury has done it; the legal interpretation supports it; the actuarial profession has been pointing toward it; and the intellectual framework exists, the implementation guidance exists, the institutional precedent exists.

The remaining question is whether allocators will act on what is now available to them, or whether they will continue to operate within frameworks whose deepest assumptions have been quietly contradicted by the institutions that establish the boundaries of what is professionally acceptable.

The argument has been won at the level of institutional precedent and legal interpretation. Whether it gets implemented in practice is now a question about industry culture, governance, and the willingness of investment committees to look at things they have been arranging not to see. The two developments I've described don't force any allocator to do anything - rather they just remove the institutional cover for not doing it. That's a different kind of pressure, and I suspect it will work more slowly than the people who pushed for these changes hope.

But the direction of travel is now clear, and the institutions that move early, not on the universal owner reframing, which is hard, but on the parallel appraisal track, which is tractable, will look prescient in five years when the rest of the industry catches up. The technical fix is small. The institutional cover for not implementing it has just disappeared. What happens next is a question about whether the asset management industry takes the cover when it's offered, or whether it waits for something stronger to force its hand.

References

The two institutional developments at the centre of the piece

HM Treasury (2026). The Green Book: Central Government Guidance on Appraisal and Evaluation. Forthcoming changes note on long-term discount rates and supplementary guidance tables. HM Government.

NatWest Cushon and Eversheds Sutherland (2025). Legal opinion on the broader interpretation of trustee fiduciary duty. Coverage in Pensions Age, Professional Pensions, Net Zero Investor, and Quietroom Insights, March 2025.

Impact Investing Institute (2025). Clarifying Pensions Fiduciary Duty. Project page and supporting commentary, Impact Investing Institute, London.

HM Government (2023). Mansion House Compact. Statement by the Chancellor of the Exchequer, July 2023.

The theoretical lineage these developments validate

Stern, N. (2006). The Economics of Climate Change: The Stern Review. HM Treasury, UK Government.

Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. HM Treasury, UK Government.

Drupp, M.A., Hansel, M.C., Fenichel, E.P., Freeman, M., Gollier, C., Groom, B., Heal, G.M., Howard, P.H., Millner, A., Moore, F.C., Nesje, F., Quaas, M.F., Smulders, S., Sterner, T., Traeger, C., and Venmans, F. (2024). "Accounting for the increasing benefits from scarce ecosystems." Science, 383(6687), 1062-1064.

Gollier, C. (2010). "Ecological discounting." Journal of Economic Theory, 145(2), 812-829.

On fiduciary duty in the context of systemic and long-horizon risk

Sullivan, R., Martindale, W., Feller, E. and Bordon, A. (2015). Fiduciary Duty in the 21st Century. UNEP Finance Initiative, PRI, UN Global Compact and UNEP Inquiry.

Hawley, J.P. and Williams, A.T. (2007). "Universal owners: challenges and opportunities." Corporate Governance: An International Review, 15(3), 415-420.

Lukomnik, J. and Hawley, J.P. (2021). Moving Beyond Modern Portfolio Theory: Investing That Matters. Routledge.

Quigley, E. (2019). "Universal Ownership in Practice: A Practical Investment Framework for Asset Owners." Working paper, Centre for the Study of Existential Risk and Cambridge Judge Business School.

On the climate litigation pipeline and trustee exposure

ClientEarth (2023). McGaughey & Davies v Universities Superannuation Scheme: legal commentary and case materials.

Sarra, J. and Williams, C. (2022). "Directors' Liability and Climate Risk: Comparative Approaches." University of Oslo Faculty of Law Research Paper.

Systemic and actuarial framing of long-horizon risk

Jones, A., Bedenham, G., Goldman, M., Ranchin, A., Spencer, N., and Trim, I. (2026). Planetary Solvency: Tipping into the wild unknown, Global nature risk management. Institute and Faculty of Actuaries and Anglia Ruskin University.

Trust, S., Saye, L., Bettis, O., Bedenham, G., Hampshire, O., Lenton, T.M., and Abrams, J.F. (2025). Planetary Solvency, finding our balance with nature. Institute and Faculty of Actuaries.

Kedward, K., Ryan-Collins, J. and Chenet, H. (2023). "Biodiversity loss and climate change interactions: financial stability implications for central banks and financial supervisors." Climate Policy, 23(6), 763-781.

Regulatory and policy context

NGFS (2023). Recommendations toward the development of scenarios for assessing nature-related economic and financial risk. Network for Greening the Financial System.

Taskforce on Nature-related Financial Disclosures (2023). Recommendations of the Taskforce on Nature-related Financial Disclosures.

Pension and Lifetime Savings Association (2023). Made Simple Guide: Nature-related risks and opportunities. PLSA.

HM Government (2026). Global biodiversity loss, ecosystem collapse and national security: A national security assessment. UK Government.