More pension schemes tasked with climate-related financial disclosure obligations

UK pension schemes worth over £1billion will come under climate-related financial disclosure obligations from the regulator from 1 October.

• UK pension schemes worth over £1 billion come under climate-related financial disclosure obligations from the regulator from 1 October
• Schemes are expected to have adequate systems of climate governance in place before 31 March 2023

From 1 October, the UK government will extend the scope for the Climate Change Governance and Reporting Regulations to include occupational pension schemes worth over £1 billion. This is the second wave of the climate disclosure roll-out by the Task Force on Climate-Related Financial Disclosures (TCFD).

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Alongside more firms coming into scope of the regulation, a new metric of reporting has been added to include Paris-aligned goals, which focus on limiting the rise in global average temperature to 1.5 degrees Celsius above pre-industrial levels. These requirements include several key areas of disclosure:

• Trustee knowledge and understanding
• Governance and risk management
• Scenario analysis
• Metrics and reporting

Explaining the significance of this development, Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “This is a milestone moment for those calling for increased climate action.

“Consistency and transparency of climate reporting is key and is what will enable all investors to make more confident decisions with their pension money. Helping us understand if we are moving in the right direction in terms of tackling the climate emergency.

“These disclosure requirements help embed climate risk into pension scheme’s investment governance and decision-making structures. Alignment with the Paris Agreement also keeps firms accountable to global climate action goals. So, seeing more schemes come under scope can only be a positive development overall – and can help to eliminate dreaded greenwash.

“Ultimately, pension savers are vital stewards of capital, and pension money is a huge productive power which can help – and not hinder – the important transition to a greener economy.”