The government will undertake a review of the 2021 Occupational Pension Schemes Climate Change Reporting Regulations, which require pension schemes to follow Task Force on Climate-related Financial Disclosures (TCFD) guidance.
The review is part of the government’s plan to update UK sustainable finance rules. The Pensions Regulator is also exploring how transition plans could apply to pension schemes, with findings due later this year. The government may expand reporting to include climate adaptation and nature risks, not just emissions.
Meanwhile, the government has also proposed that large companies and financial institutions, including pension schemes, follow global sustainability standards and publish their climate transition plans to drive green growth and investment. It is seeking feedback on these proposals as part of three consultations papers published today.
As part of this consultation, the government has outlined draft rules on how companies should report sustainability and climate-related risks. These rules are based on international IFRS S1 and IFRS S2 standards from the International Sustainability Standards Board (ISSB), and aim to provide investors with better information about how companies manage climate change and other environmental challenges. The government plans minor adjustments to align the standards with UK law while maintaining “international comparability,” aiming to “limit divergence from the ISSB Standards as far as possible.”
The government also outlined options for mandating credible transition plans from FTSE 100 companies and UK-regulated financial institutions, including pension schemes. The proposals aim to standardise planning for how organisations will align their business models with the 1.5°C target of the Paris Agreement, helping to future-proof firms and channel capital towards the clean energy transition.
The government says the UK needs around £130 billion of investment from the private sector to stay on track for net zero by 2050. Over 70 per cent of FTSE 100 companies already produce voluntary transition plans, and the new rules, according to the consultations, would make such planning mandatory to future-proof businesses, attract global investment, and reinforce the UK’s role in green finance.
The consultations are part of a phased approach, with further reviews and policy updates to follow, including work on sustainability assurance and more detailed transition plan standards. The Financial Conduct Authority (FCA) also plans to revise disclosure rules for listed companies and asset managers to align with the new SRS and the Transition Plan Taskforce (TPT) framework.
Announcing these consultations the secretary of state for energy security and net zero Ed Miliband said: “Transition plans are a vital part of our commitment to secure Britain’s position as the green finance capital of the world. This offers a significant growth opportunity for the UK’s financial services sector, which is why we are putting sustainable finance at the heart of our upcoming Industrial Strategy.
“More widely, transition plans would help mobilise the investment needed to seize the benefits of the clean energy revolution across the economy – growing our clean energy industries, future-proofing existing sectors, and increasing our economic resilience to climate impacts. It is for all these reasons that transition planning will be central to delivering our number one mission on economic growth.
“The government will do whatever we can to ensure any future regulation is simple and easy to navigate, in light of our agenda to ensure that the regulatory landscape functions effectively, and our drive to ensure that UK capital markets remain internationally competitive.”
