We see a broad spectrum of attitudes from our clients about the relevance of climate change on their businesses, pension fund investment strategies and push towards digital (and therefore more carbon neutral) – some are doing the minimum as required by law, while others are wholly aligning their pension fund strategy to their corporate climate agenda and net zero target.
Members are increasingly interested (and worried) about climate change and want the agency to invest their pension benefits/savings in a way that aligns with their own personal agenda (defined contribution schemes) or know their scheme is using its influence for the greater good (defined benefit schemes).
The Taskforce on Climate-Related Financial Disclosures (TCFD) report gives trustees an opportunity to demonstrate their ‘value for members’ through their investment strategy. But taking pension scheme members on the sustainability journey is more than a TCFD report, it’s about overall reputation.
“All savers deserve to be in well-governed schemes which protect their retirements by appropriately managing and reporting on ESG and climate related risks and opportunities.”
Nicola Parish | Executive Director of Frontline Regulation, TPR
We can help trustees promote their good work to their members by producing well-written, beautifully designed TCFD reports that set out, in member-friendly language, what their pension fund is doing to mitigate climate change. And we can support them in efforts to reduce carbon through developing and delivering digital transformation.
With many more pension fund managers having to produce a report, now is the time for them to think about how they want to present themselves to their members and how they align that narrative to the corporate sponsor. Box-tickers or game-changers?
The Pensions Regulator (TPR) is ramping up its enforcement of public website disclosures, particularly in relation to environmental, social and governance (ESG) and climate-related disclosures. It is essential that trustees are aware of their duties and the potential penalties if they fail to comply.
Trustees are required to publish, on a public website, a number of documents including a Statement of Investment Principles, Implementation Statement and, where required, a TCFD report and extracts of the Chair’s statement. Trustees must also include details of the website on their scheme returns, so that the TPR can check that they are complying with their disclosure duties.
“All savers deserve to be in well-governed schemes which protect their retirements by appropriately managing and reporting on ESG and climate related risks and opportunities. These reporting disclosures represent compliance with the basic requirements in relation to ESG and climate change.” Nicola Parish, Executive Director of Frontline Regulation at the TPR, February 2023.
“Customers, employees and the wider public are using the power of their investment clout to compel change.”
Carl Hess | Chief Executive Officer, WTW
The Regulator wants to see that trustees have met the requirements of the climate regulations[1]. They will look for clear evidence that trustees:
Campaigns across the wider society are educating people about the power of their investments. As a result, employees are becoming increasingly interested (and worried) about climate change and the effect their pension is having on the planet.
“Customers, employees and the wider public are using the power of their investment clout to compel change.” Pushing back, moving forward (Economist, 2022, Carl Hess/WTW sponsored).
Employees want reassurance that the trustees of their pension scheme are investing their money responsibly and protecting their retirement benefits from the risks of climate change.
And let’s not forget that easy to use digital services are now the way many people prefer to run their lives, and their pension is no exception.
We see a range of attitudes from trustees about the risk of climate change to their scheme and sponsoring employer. Two thirds of FTSE 100 companies have signed up to the United Nations Race to Zero campaign, a global alliance committed to achieving net zero by 2050, and many have set themselves earlier targets. So, the pressure is high on trustees to align on their approach and their narrative with the corporate.
Some are doing the minimum as required by law, while others are wholly aligning their pension fund strategy to their corporate climate agenda.
What’s important to you will depend on many factors, including whether you’re more focussed on:
There is also some pride in being a progressive scheme within the industry. Done well, improves member engagement, and employee retention
As employee experience – engagement experts – we elevate and add value to this process by looking at:
01
We create a dialogue with members and find out what matters most to them using our Engage survey technology and Virtual Focus Groups. Better member insights help you create a better member experience. Through the Climate and Resilience Hub team we can also deliver trustee training and TCFD gap analysis.
02
We work closely with trustees to develop a narrative framework that is not at risk of ‘green washing’ and that caters to the long-term sustainability strategy, investment principles and how they are being implemented. We also advise and deliver on digital transformation.
03
We have a content bundle, including the video ‘Your pension, people and the planet’ to create connection and context for members about why climate matters with their pension, we make SIP, Imp and TCFD content work harder and have a member friendly TCFD template reviewed and developed with the Climate Hub team, and provide the scheme/company with a competitive edge in the industry.
