Head of the ACA’s Climate Risk Group, Stewart Hastie comments: “Overall, there are a number of changes from the initial proposals which are a positive response to some of the practical issues identified and the proposed statutory guidance is helpful. It’s clear that the Government expects all schemes to start considering climate risks, with the larger schemes needing to disclose first. The guidance is intentionally aspirational at the current time – which we support – and helpfully this has been acknowledged with the repeated ‘as far as they are able to’ provision.
“There remains a lot for trustees to take in and do. They will be relying on an industry that is still working out exactly what is available, what is relevant and how to assess the impact of future climate scenarios.”
The ACA response notes that perhaps inevitably, given the Government’s ambitions for change and the utter scale of the wider issue of climate change, there remains a risk of spurious data gathering and calculations in this area. ACA expresses concern at the risk of a herd mentality when it comes to metrics and targets. ACA also says it has some concerns around the possibility of disproportionately diverting trustee’s resources away from focussing on other major pensions risks.
Stewart Hastie added: “The Pensions Regulator (and advisers) will have a major role to play in helping schemes understand what ‘good enough’ looks like, especially over the next few years and whilst HMT’s TCFD roadmap is implemented. We’ve already called for the TPR to produce an annual statement along these lines.
“However, we believe this a major opportunity to engage scheme members in their pensions savings. We suggest the inclusion of additional, non-statutory ‘best practice’, guidance on how schemes could provide simplified but engaging information to members off the back of TCFD reporting to engage members in their benefits and climate change issues.”
The ACA’s 2020 Pension trends survey report revealed a huge increase in member interest in investments in ESG with 52% of schemes reporting greater interest from members in investments in socially responsible, environmental and climate areas. However, it found schemes are hesitant in reacting to climate change investment risks and opportunities. With the Government keen to see its TCFD Regulations in place ahead of COP21 in November, the ACA says consulting actuaries are committed to guiding schemes to take positive actions in this important area.
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