8 June 2021
The Department for Work and Pensions (DWP) has today published its response to January's consultation “Taking action on climate risk: improving governance and reporting by occupational pension schemes”.
This consultation was looking for views on detailed proposals to require trustees of larger occupational pension schemes to address climate change risks and opportunities. The proposals are based on the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) and will be implemented using the powers that the DWP was granted by the Pension Schemes Act 2021.
The final regulations and statutory guidance have also been published today, giving pension schemes clarity around these new requirements.
LCP has welcomed the detail as a major milestone in how schemes manage and report on climate-related risks and opportunities.
Claire Jones, Partner and Head of Responsible Investment at LCP, commented:
"Today marks a major milestone in requiring pension schemes to wake up to the risks of climate change and effectively manage the risks it poses to members' pension benefits. Given the urgency of the climate crisis, the speed at which the Government has brought forward legislation in this area is to be applauded. We now have the final regulations and statutory guidance that set out what large schemes need to do, so they can proceed with confidence in preparing for the new regime.
“With less than four months before the new rules apply to the first wave of schemes, trustees will be relieved that there are few material changes since January’s consultation drafts. The most significant ones will be welcome as they respond to practical concerns that LCP and others raised during the consultation. These include raising the threshold for “popular” DC default arrangements for which scenario analysis is required from 250 members to £100m or 10% of the assets and letting DB schemes align the scenario analysis requirement with their three-yearly valuation cycle."