Industry welcomes UK pensions regulator’s new climate strategy

The Pensions Regulator says schemes will face enforcement action on climate change disclosures

Sustainable investment professionals have welcomed The Pensions Regulator’s (TPR) ‘joined-up approach’ to tackling climate change and helping trustees meet climate-related challenges.

TPR this week published its strategic response to climate change. In it the regulator sets out six objectives: schemes should publish their SIP, implementation statement and, where appropriate, their Taskforce on Climate-related Financial Disclosures (TCFD) report or face enforcement action; the TPR will publish its own TCFD approach; it will publicise its strategy; further contribute to stewardship activities on climate change; publish a climate adaptation report before COP26; and set a 2030 net-zero target.

It identified the UK government’s Green Finance Strategy, the TCFD and The Pension Schemes Act 2021 as key drivers for its approach, and said its own regulatory approach would focus on setting clear expectations, identifying risk early, driving compliance through supervision and enforcement, and working with others.

“Wherever the focus lies for trustees, it is absolutely the case that any scheme that does not consider climate change is ignoring a major risk to pension savings and missing out on investment opportunities,” TPR CEO Charles Counsell said in a foreword.

Commentators were encouraged to see the TPR highlight the integration of different risks from climate change.

Claire Jones, partner and head of responsible investment at LCP, said: “It is reassuring to hear that TPR is working with government departments and other regulators to ensure a joined up approach across the investment chain. Trustees should note the emphasis on stewardship and, for defined benefit schemes, the need to integrate the management of covenant, actuarial and investment risk from climate change.”

Cardano UK group head of sustainability Will Martindale agreed the integration of risks is key and said: “With its new strategy, TPR will provide additional welcome incentives and tools to encourage trustees to obtain the data and create the investment processes required to effectively respond to the climate crisis and manage climate-related risks. As a result, we expect to see major progress in climate-related financial governance, reporting and investment decision-making.”

Last month, pensions minister Guy Opperman was among those calling on asset managers to ‘step up’ when it comes to pensions voting transparency after two reports showed most asset managers were unable to provide details of how they exercised their voting rights.

On TPR’s new strategy he said: “I welcome TPR stepping up on this issue. By increasing oversight of climate change and giving it the weight it deserves it can provide better protection for pension savers from significant financial risk.

“In particular, I applaud the commitment to update the trustee toolkit, and to properly enforce compliance with the basics.”

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Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...