Regulator publishes new climate change strategy for pension schemes

The Pensions Regulator (TPR) has published new guidance to help pension scheme trustees protect savers from the financial risks of climate change.

The new climate change strategy outlines how all schemes must comply with requirements to publish their statement of investment principles (SIP) – including their policies on stewardship and financially-material environmental considerations – along with their implementation statement.

TPR said that these disclosures represent compliance with the basics on climate change, and that it will take enforcement action if schemes fail to comply.

The strategy also urges pension schemes to devote more board time to climate change, to consider specific training, and to integrate consideration of climate risk right across decision-making.

This comes ahead of proposed regulations which will require trustees of larger schemes to maintain oversight of, and make mandatory disclosures in relation to, climate risks.

“Driving trustee action on the risks and opportunities from climate change will create better outcomes in later life for workplace savers,” said David Fairs, TPR’s executive director of regulatory policy, analysis and advice,

“Our strategy outlines how we will help trustees comply with the new rules for larger schemes, but it signals work on climate change needs to happen right across the pensions landscape.

“Climate change is a risk for schemes whatever the size or investment strategy. It is clear that all schemes need to build their capacity in this area if they haven’t already.”

Proposals under the Pension Schemes Act will see larger schemes and all master trusts required to disclose their Taskforce on Climate-related Financial Disclosures (TCFD) report.

By the end of 2023, TPR anticipates that a significant amount of pension savings will be in schemes reporting in line with the TCFD recommendations, including 81% of memberships and 74% of occupational pension scheme assets.

It is planning to publish guidance later this year, following engagement with industry, to help schemes comply with the new legislation and make consideration of climate change risks and opportunities part of their systems of governance.

“Building capacity means trustees will be better placed to understand what climate-related issues mean for their scheme – and better able to make decisions which contribute to good saver outcomes,” Fairs continued.

“Where we do not see schemes complying with the rules, we will consider enforcement action. Our strategy also shows how we, as an organisation, will play our part in the UK’s transition to net zero.”

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