The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 take effect on October 1, 2021, for pension plans (including authorized master trusts and collective defined contribution plans) with assets over 5 billion pounds sterling. Plans with assets over 1 billion pounds will have to comply by October 1, 2022. The new requirements are based on a framework developed by the international Task Force on Climate-related Financial Disclosures (TCFD). The Financial Stability Board established the TCFD to develop recommendations “for more effective climate-related disclosures” that could promote more informed decisions and aid understanding of the climate-related risks in the financial system. While the U.K. is set to be the first major national economy to require pension plans to consider and report on climate risks, the issue of course is a global one, and so related types of actions potentially may follow elsewhere. Similar disclosure requirements already apply to Institutions for Occupational Retirement Provision plans in the European Union as covered in a previous Global News Briefs article: EU: New sustainability disclosures required for pension funds.
The regulations require plan trustees to carry out certain activities and to report on how each of these requirements has been met. The report must be signed by the chair of the plan trustees and published on a publicly available website within seven months from the plan year end. Actions to be taken by trustees include:
The new regulations aim to ensure that the largest pension plans reflect climate issues as part of the operation and strategy of managing their risks and opportunities. While we anticipate that the approach to addressing climate-related risks will be different across pension plans and is likely to evolve over time, we believe it is important that all plans with assets over 1 billion pounds take proportionate action now. Addressing the new requirements properly will take a considerable amount of effort, and there are benefits from a risk management perspective to not falling behind actions that others are taking, so it is important to start early. A full and deeper analysis of the new regulations is available in our recent Pensions Briefing article: Reporting pension scheme climate risks – what, how, when?