On the go: The Pensions Regulator has warned that trustees must ensure their climate advisers are appropriately skilled and provide relevant and helpful advice.
In a response to a consultation launched in July, published on Thursday, TPR stressed that not all advisers will have the right capabilities to support trustees implementing these requirements for the first time, as this is “a new and developing area”.
The regulator argued that trustees must ensure the advice they get from external experts is relevant and helpful.
David Fairs, TPR’s executive director of regulatory policy, analysis and advice, noted that trustees make use of external expertise in a variety of areas.
“However, we recognise that the governance and reporting of climate-related risk is relatively new, so trustees may be more reliant on external experts while they build their scheme’s capability in this area.”
He continued: “Trustees must take responsibility for ensuring their advisers have the appropriate skills and expertise, and the advice they offer is relevant, helpful and represents value for money. After all, ultimately it’s trustees who are responsible for any decisions.”
The final version of TPR’s guidance for trustees on meeting tougher climate change governance and reporting standards, also published on Thursday, was informed by the consultation, which covered the Department for Work and Pensions’ new rules on Task Force on Climate-related Financial Disclosures.
The new rules initially apply to authorised schemes and those with relevant assets of £5bn or more. However, it will also apply to schemes with relevant assets of £1bn or more in assets from October 1 2022, and the DWP has said it will consider rolling the rules out to smaller schemes in 2023, the regulator stated.
TPR will also contact trustees of schemes that may have moved into scope of the rules since the last valuation to ensure they are aware of their duties.
“While this guidance is aimed at trustees in the initial group of schemes within scope of the rules, it offers an opportunity for all trustees to improve their scheme’s structures and governance in relation to climate-related risk and opportunities in preparation for any expansion,” Fairs said.
The guidance describes what trustees need to do and report on in a scheme’s annual climate change report or TCFD report to comply with regulations.
It also gives practical examples of ways trustees can comply with the regulations. An appendix to TPR’s monetary penalty policy, published at the same time as the guidance, highlights the enforcement approach that may be taken to breaches, the regulator added.
