Regulator clarifies climate disclosure rules

The Pensions Regulator has set out new guidelines clarifying its expectations for schemes in disclosing climate change information, to comply with rules under the Pension Schemes Act 2021.

Trustees will be required to publish their statement of investment principles, including their policies on stewardship and financially material environmental considerations, and an implementation statement, under a new climate change strategy published by the regulator.

The new strategy comes ahead of planned regulations which will require trustees of larger schemes to maintain oversight of, and make mandatory disclosures in relation to, climate risks.

The proposals under the Pension Schemes Act 2021 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, the regulator anticipates a significant amount of pension savings will be in schemes reporting in line with the TCFD recommendations – 81% of memberships and 74% of occupational pension scheme assets.

The regulator is planning to publish further 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.

It will also further support the development of trustees’ knowledge and understanding by updating the content on climate change in its Trustee Toolkit.

Hymans Robertson actuary, Lisa Deas, said the actuarial firm welcomed the insight on the guidance and support trustees can expect over the next few years to help them manage climate risk and opportunities effectively.

“In particular, we welcome TPR’s plans to bolster the climate change content on the Trustee Toolkit which we had advocated in our response to the DWP’s consultation on ‘Taking action on climate risk: improving governance and reporting by occupational pension schemes’,” she said.

This change will give all trustees access to free training materials to improve understanding of climate change and take direct action, Deas added.