The Department for Work and Pensions announced a phased introduction of mandatory climate change governance and disclosure requirements for UK large pension scheme trustees with the recommendations being considered best practice for all pension scheme trustees.
The new Occupational Pension Schemes Climate Change (Governance and Reporting) Regulations 2021 state that the largest UK pension schemes are to be subject to these obligations from 1 October 2021.
- Occupational pension schemes with more than £5bn of net assets, along with authorised master trusts and authorised collective money purchase schemes
- Schemes with more than £1bn of net assets will need to comply from 1 October 2022
- Application to smaller schemes will then be reviewed in 2023
The first reports have been produced in line with the Climate Change Governance and Reporting Regulations and are being published for the December 2021 year ended pension scheme accounts.
The Climate-related Financial Disclosures (TCFD) is a mandatory requirement for the largest of schemes which trustees must publish a TCFD report within 7 months of the scheme’s first year-end after the regulations applies to the scheme, and then for each year thereafter where their scheme continues to meet the asset size threshold.
The TCFD report signed by the Chair of Trustees is to be made publicly available free of charge on a website with the website address included in the scheme’s annual report and annual benefit statements to members.
The Pensions Regulator (TPR) will be reviewing the TCFD reports and providing high-level observations and feedback to in-scope schemes and inform smaller scheme trustees not in scope but who wish to improve climate-related risks and opportunities management.
TPR penalty notices to trustees of schemes for TCFD reports are:
- where the report has not been published – mandatory penalty of at least £2,500
- where it is clear the trustees have not made a genuine effort to comply with the regulations – discretionary penalty of up to £50,000
There is significant work which has been undertaken by trustees to comply with the Climate Change Governance and Reporting Regulations and this will continue as medium schemes take on the challenge to publish their TCFD reports in the next wave.