From 1 October 2021, the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 (the Climate and Governance Regulations) require trustees of certain schemes to consider climate-related risks and opportunities in more detail than before. Under the requirements, trustees must identify, assess, and manage climate-related risks and opportunities, and report on what they have done. These reporting requirements were developed from the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD).

The review was performed by TPR in order to share emerging good practice.  Findings highlighted some good practice with respect to trustees taking action including:

• planning climate and sustainability training for trustees and others involved in scheme governance about climate-related risks and opportunities
• developing a trustee policy on investment beliefs relating to climate change
• conducting due diligence and checking advisers' climate credentials
• working with investment managers to obtain better data
• allocating more funds to sustainable investments
• using stewardship to manage climate-related risks
• switching to climate-tilted pooled funds

However, whilst there were some areas of good practice, the review also found several areas requiring improvement.  Common issues included:

• a lack of sufficient background information on the scheme meaning disclosures were difficult to interpret – particularly for more complicated arrangements such as hybrid or sectionalised schemes
• disclosures of strategy, scenario analysis and metrics activities were not always provided at the appropriate level as described in statutory guidance from the Department for Work and Pensions (DWP)
• accessibility issues, which could make it difficult for savers and others to find and access reports online, including long or complicated web addresses and use of PDFs not compatible with those using reader accessibility requirements
• Some reports missed disclosures required by DWPs statutory guidance.

TPR expects trustees, advisers, and in-house teams to carefully consider the findings when preparing future reports under the Climate and Governance Regulations.  The findings may also be useful to trustees of smaller schemes that are not subject to the regulations in helping them to improve their management of climate-related risks and opportunities. 

A press release and the full review are available on TPR website.