Trustees of larger occupational pensions and authorised schemes could soon be required to calculate and publish their schemes’ carbon footprint under new government proposals.
The Department of Work and Pensions is now consulting on draft legislation to enact its proposals to improve the governance and reporting of climate change risks and opportunities.
This consultation, which closes on March 10, is aimed at trustees and managers, pension scheme service providers and scheme members and beneficiaries as well as other interested stakeholders.
This is in response to an earlier consultation on the broader policy proposals.
These disclosures would be required to be publicly available and referenced with the schemes annual reports and accounts. Pension savers would also have to be information where they can access this information in their annual benefit statement.
This is a step up from current regulations, which require trustees to take into account “financially material’’ environmental, social and governance (ESG) factors, including climate change. They must include their investment approach to these within their annual Statement of Investment Principles.
B&CE, the provider of The People’s Pension chief investment officer Nico Aspinall says: ““Good governance is crucial to any successful occupational pension scheme so anything that assists trustees in considering the environmental impact of decisions they make is to be welcomed.
“We will carefully consider the proposals contained within this latest consultation document before responding.”
He added: “The People’s Pension is committed to tackling climate change and has actively engaged with the Department for Work and Pensions through their earlier consultation on how best to apply the TCFD recommendations to UK pension schemes.”
Hymans Robertson head of responsible investment, Simon Jones adds: ” The DWP’s response to the consultation on climate governance and reporting requirements is welcome and we’re pleased that several of the changes we advocated for have been reflected in the updated policy proposals.
“Changing the requirements for trustees on the frequency of both scenario analysis and reporting is appropriate given data availability and the meaningfulness of such assessments. We want trustees to engage with climate change and the analysis they undertake should allow them to take informed action, rather than box tick.
“The requirement for more and better information will rightly place an added reporting requirement on asset managers, emphasising a theme of transparency within the consultation response.
“Asking for information creates scrutiny and ultimately change, reminding us that we should not lose sight of the broader goals that these policy proposals are striving for. We want an economy that recognises the importance of the environment. We want sustainability and the consideration of climate risk to be embedded in the financial system, and for capital to be directed towards companies that will lead the transition to a lower-carbon economy. And we want pension trustees and the broader financial services industry to be an integral part of this change. Huge challenges remain, however the proposed regulations will help to achieve these aspirations.”
