The Pensions Climate Risk Industry Group (PCRIG) has launched a consultation on the new guidance it is publishing for trustees.
This guide is designed to help trustees meet existing legal obligations, when it comes to assessing, managing and reporting climate-related financial risks.
The full guide will look at how trustees meet existing legal obligations and consider financially-material factors in their investment decision making, as well as how to integrate the consideration of climate-related risks within trustee governance and risk management processes.
The draft guide is accompanied by a much shorter “quick start” guide. Both are aimed at trustees of private sector DB and DC schemes.
PCRIG was set up l by the DWP, TPR and other government departments to develop industry-wide guidance for pension scheme trustees on climate-related risks and voluntary alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Government has set the expectation that all listed companies and large asset owners, including occupational pension schemes, will disclose in line with TCFD by 2022.
Amendments made to the Pension Schemes Bill will, if passed, provide a regulation-making power for the government to require prescribed pension schemes to publish climate change related risk information.
This consultation seeks views on the guide. Any moves to put TCFD reporting obligations onto a statutory footing will be subject to separate consultation by the DWP.
Speaking at the launch of the consultation at the PLSA conference, the pensions minister Guy Opperman, says: “I am committed to ensuring trustees do everything they can to act to limit the risk climate change poses to their members’ future retirement income.
“TCFD is the most widely-adopted way in which organisations are managing and reporting climate risk, and I want to ensure all trustees have the help they need to align their schemes with its recommendations.”
PCRIG chair and partner at Sackers Stuart O’Brien adds: “Most trustees will have acknowledged the financial risk of climate-related risk on their pension schemes, but so far few have developed concrete plans to quantify and address the risks of climate change or capitalise on the opportunities of the transition to a net zero carbon economy.
“It is for that reason that we are providing new cross-industry guidance to help pension trustees meet their existing legal responsibilities.”
PCRIG member and policy lead for investment and stewardship at the PLSA Caroline Escott says: “Climate change poses a systemic risk to nearly every sector and every business. It is vital that trustees have a clear framework when considering how to manage the potential impact of climate change on scheme member outcomes.
“The PLSA is pleased to have contributed to what we believe will be a useful tool for schemes to use in complying with their new regulatory duties.
“The guidance recognises the fact that most schemes will need appropriate support from their managers and consultants, offering practical tips and guidance for making schemes’ expectations on the consideration of climate risk clear to their investment service providers.
“We strongly encourage all types and size of scheme to respond to this consultation.”
This guide has been welcomed by many in the industry. Aon said it had contributed to the development of the new guide and is committed to helping trustees ensure their pension schemes are in a strong position to manage the risks and opportunities from climate change as well as the transition to a low carbon economy.
Aon head of climage change insights and modelling Mark Jeavons says:
“Climate change poses a global systemic risk for economies, markets and pension schemes. It is therefore essential for trustees and investors to understand how physical and transition risks from climate change will impact pension scheme member outcomes.
“The TCFD guidance provides consistent and comparable guidelines for disclosures, which helps trustees to assess a pension scheme’s resilience to climate change properly and to have the information needed to address climate related risks and opportunities. Our hope is that this will ultimately contribute to good pension scheme member outcomes and result in a more sustainable future.”
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