Rachel Basarab-Horwath, Director, Institutional Business, AXA IM, at AXA investment Managers: “The urgency to implement climate-strategies has rapidly risen up trustee agendas due to mounting awareness of the dangers of ignoring climate risks, along with regulatory and political momentum. These emerging risks are a difficult bedfellow with the predictability required by cashflow driven investors and so this guidance is a welcome step forward in helping UK pension schemes integrate climate related objectives into endgame strategies as well as evaluate how climate-related risks may impact their schemes in line with the TCFD recommendations.
“Quantifying these risks is a challenging task as multitude of data and KPIs exist. One of our roles as asset managers is to assist pension schemes by providing a dashboard of climate data and metrics that can allow them to assess not only their current emissions, but the long-term carbon pathway of portfolios as well. With a clear picture of climate-related targets, trustees can be best placed to review what changes are required to mitigate the risks and target alignment with the Paris Agreement.”
William Compton, EY-Parthenon’s head of ESG for pensions: With climate change being a defining issue of our time, the ambition and principles set out by The Pensions Regulator (TPR) are a welcome step forward for the industry as we strive for a greener, more sustainable financial future and optimal outcomes for savers and pension scheme members.
“TPR have clarified their expectations of their regulated community in navigating climate change and in doing so have worked collaboratively with industry, other regulators and wider stakeholders to support the pensions industry. Continuing to work in partnership with a wide network of stakeholders will help ensure an effective roll-out of this strategy.
“The pension scheme climate change agenda is moving at pace and engagement around the associated risks and opportunities is still in its infancy. As such, trustees will likely benefit from the guidance regarding the new climate change disclosure regulations and how to embed climate change into integrated risk management.
“Climate change risks and opportunities will affect risk-adjusted investments returns, as well as the assessment of sponsor covenants, so further guidance to help trustees meet their fiduciary duties and implement climate resilient journey plans will be crucial.”
Claire Jones, Partner and Head of Responsible Investment at LCP, commented: The strategy provides welcome clarity on TPR’s expectations and plans in relation to climate change. It underscores the importance of this topic for pension scheme trustees and confirms that it’s a topic TPR expects them to prioritise. It is reassuring to hear that TPR is working with government departments and other regulators to ensure a joined up approach across the investment chain. Trustees should note the emphasis on stewardship and, for defined benefit schemes, the need to integrate the management of covenant, actuarial and investment risk from climate change.”
Lisa Deas, Actuary, Hymans Robertson says:“We welcome The Pensions Regulator’s climate change strategy providing insight on the guidance and support trustees can expect over the next few years to help them manage climate risk and opportunities effectively. In particular, we welcome TPR’s plans to bolster the climate change content on the trustee toolkit which we had advocated in our response to the DWP’s consultation on ‘Taking action on climate risk: improving governance and reporting by occupational pension schemes’. This change will give all trustees access to free training materials to improve understanding of climate change and take direct action. The strategy also provides further detail on how TPR will support the new requirements of the Pension Schemes Act 2021 (which will see large pension schemes and all master trust and collective DC schemes having to report in line with the TCFD recommendations), in particular with guidance to support the regulations. Many schemes will welcome the plans to publish best practice example TCFD reports, albeit this isn’t planned until the regulations are reviewed in 2023 so will not inform the early rounds of reporting. We strongly welcome the measures designed to support smaller schemes who aren’t subject to the TCFD reporting requirements – in particular the planned guidance on taking climate change into account in integrated risk management.”
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