TPR urges DC schemes to pay more attention to climate change

The watchdog’s annual survey of DC schemes, published on Tuesday, found that while the number of those schemes considering climate change in their investments has doubled since 2019, it still stands at just 43 per cent.

Of those DC schemes that had not considered climate change, 19 per cent were planning to review this, while a concerning 21 per cent felt climate change was not relevant to their scheme.

David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said: “The pension schemes bill — which we expect will become law very soon — will see requirements for the effective governance of climate change risks and opportunities written explicitly into pensions law in the most comprehensive way to date.

“Trustees already need to consider climate change as part of their statement of investment principles, but the new act will significantly increase the expectations placed upon them.

“Although a phased approach means the new act won’t affect all DC schemes to start with, it will increase the expectations savers have of those responsible for their pension pots when it comes to climate change.”

Pensions Expert reported on January 27 that the Department for Work and Pensions is looking to broaden the scope of climate risk analysis to cover not just the environmental impact of pension schemes’ portfolios, but also sponsor covenants and actuarial valuations.

In his foreword to the report, pensions minister Guy Opperman wrote that the measures are integral to the government’s plan for a “green industrial revolution”, which aims to cut emissions by a further 68 per cent by 2030.

He said that these new measures will allow the government to pursue ways to “revolutionise pension investment, making saving better, safer and greener”, putting pension schemes at the forefront of the “green tech and green energy revolution we will need for the transition”.