On the go: The Employer Covenant Practitioners Association has emphasised the need to consider potential implications of climate change on sponsors’ businesses as part of defined benefit covenant assessments.
On Wednesday, the ECPA said it is encouraging practitioners in its member firms to ensure they consider fully the implications of climate changes in their work, and for trustees and sponsors to also properly consider climate change.
The ECPA – which was originally set up as the Employer Covenant Working Group – is calling for practitioners to comment on possible transitional risks, if relevant, as well as potential physical risks such as weather events.
Paul Burnett, chair of the association, said: “ECPA member firms advise trustees and sponsors of UK defined benefit pension schemes on the legal obligation and financial ability of sponsors to support schemes now and in the future – recognising that schemes typically have liabilities flowing out for many decades.”
He added that “it is, therefore, important that trustees consider the potential implications of climate change on their sponsors’ covenants where appropriate and practical to do so”.
An increasing industry focus on the need to take into account financially material environmental, social and governance considerations – such as climate change – has bumped ESG further up trustee agendas.
Earlier this month, for example, The Pensions Regulator, Financial Conduct Authority, the Prudential Regulation Authority and the Financial Reporting Council issued a joint statement on climate change, highlighting that the issue is a core financial risk impacting widely across markets, business and the economy.
The statement welcomed the action being taken as part of the UK’s Green Finance Strategy, which sets out proposals for green finance and how they will support the UK’s economic policy.
