On the go: The government is expecting the Pensions Regulator to publish a strategy for dealing with the financial risks arising from climate change, among other requirements to integrate the Green Finance Strategy into its activities.
In a letter to TPR’s chief executive Charles Counsell published on Wednesday, Pete Searle, director of private pensions and arm’s length bodies partnership at the Department for Work Pensions, said the government envisages that the regulator will set out how to resource and implement this strategy while continuing to engage with the Task Force on Climate-related Financial Disclosures.
Mr Searle noted that the government recognises TPR has already taken action in this area, including questioning defined contribution schemes on climate change in annual governance surveys, and by participating in the Pensions Climate Risk Industry Group.
This working group “has made progress developing guidance for pension funds on how pension trustees can address climate-related financial risks as part of their governance processes,” Mr Searle said, adding that this guidance will be become statute.
Mr Searle also noted that the watchdog has committed to produce a report on climate change adaptation in the occupational pensions under the Department for Environment, Food and Rural Affairs reporting regime by December 2021.
“This adaptation report provides a key opportunity for the regulator to conduct in-depth research into the impact of climate change risks on the sector, and to work with government on a regulatory strategy to address those risks,” he said.
The DWP expects this report to cover financial risks and opportunities from climate change that impact TPR and trust-based occupational pension schemes; how the regulator and those running pension schemes are responding to and managing the financial risks and opportunities associated with climate change, and the watchdog’s policy and regulatory approach to adapting to climate change.
If an amendment introduced earlier this month to the pensions schemes bill is approved, reporting on climate change strategies will become mandatory for pension schemes.
David Fairs, TPR’s executive director leading on climate change and ESG factors, said: “We are developing our strategy for dealing with the financial risks arising from climate change, which will include how we continue to engage with the recommendations of the Taskforce on Climate-related Financial Disclosures.
“We are already actively engaging with trustees on climate risks as part of our relationship supervision approach with the largest schemes, which cover tens of millions of savers, including via our supervision of master trusts.
“Additionally, TPR will contact schemes where it is identified that they fail to comply with basic governance requirements, such as making available their statement of investment principles. We will consider enforcement action where appropriate.
“Where schemes appear unwilling or unable to comply with these types of governance requirements we will encourage them to consolidate into larger schemes such as master trusts, where governance will be more effective.”
