TPR: DC schemes must get ready for new climate risk rules
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The Pensions Regulator has said that "too few trustees and managers of defined contribution schemes are paying proper attention to risks and opportunities from climate change".
Its latest annual survey of DC schemes, published on Tuesday, shows the number of DC schemes whose trustees are considering climate change in their investment strategies has doubled since 2019, but still covers fewer than half of DC schemes (43%).
Its latest annual survey of DC schemes, published on Tuesday, shows the number of DC schemes whose trustees are considering climate change in their investment strategies has doubled since 2019, but still covers fewer than half of DC schemes (43%).
The survey of 200 schemes and 16 master trusts, carried out before Covid-19, found that of those schemes whose trustees had not considered climate change in their investment strategies, 19% were planning to review this, but more than a fifth (21%) felt that climate change was not relevant to their scheme.
The results show a surprisingly large gap between the status quo and incoming requirements. The pension schemes bill – expected to receive Royal Assent soon – will see requirements for the effective governance of climate change risks and opportunities written explicitly into pensions law.
“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," said David Fairs, TPR’s executive director of regulatory policy, analysis and advice.
In the spring, the regulator will publish a strategy setting out how it plans to help trustees meet challenges around climate change.
In the spring, the regulator will publish a strategy setting out how it plans to help trustees meet challenges around climate change.
“Climate change risks will threaten pension savings right across the industry. This means trustees should build their capacity in this area now, so they can understand what climate change will mean for their scheme and so be better placed to make decisions contributing towards good outcomes for savers,” Fairs added.
