As 2025 draws to an end, this article reflects on key developments in climate requirements over the year and, looking ahead to 2026, provides tips for trustees seeking to support further sustainability-related progress.
As climate science reveals increasing risks, there have been calls for UK trustees to reassess and broaden their approach to fiduciary duty. As confirmed by the Pensions Minister during the Pension Schemes Bill debate[1] in the House of Commons on 3 December 2025, the government will not amend fiduciary duty within the Bill but will instead legislate separately in 2026 to provide statutory guidance. This guidance may clarify how trustees can consider system-level risks without breaching their core duty to act in members' best interests. Climate is currently the most prominently considered of these system-level risks, but trustees are increasingly thinking more broadly. Growing momentum in this area is demonstrated by the publication of a paper by the IFoA considering "Planetary solvency"[2] - highlighting how "our society and economy fundamentally depend on the Earth system which provides essentials such as food, water, energy and raw materials".
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In 2025, The Pensions Regulator (TPR) issued updated guidance[3] clarifying that climate and ESG risks are financially material and must be considered as part of trustees' fiduciary duty[4]. Trustees of larger schemes are expected to manage climate risks and report in line with the Task Force on Climate-related Financial Disclosures (TCFD) related requirements adopted by the Department for Work and Pensions (DWP). As the interpretation of fiduciary duty evolves, as noted above, it is becoming more accepted that it should include consideration of the potential financial impacts of systemic risks, giving rise to wider considerations such as long-term resilience and alignment with environmental and societal thresholds.
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COP30 has been marked by a highly fragmented global policy landscape, as tracked by the Principles for Responsible Investments (PRI) commissioned Inevitable Policy Response (IPR) consortium[5]. Analysis from IPR suggests while the US has seen a reversal in climate policy momentum (IPR's relative assessment of tracked policies against their transition forecast), the UK and other major economies have largely maintained or modestly advanced their climate frameworks. IPR's work highlights that, despite political headwinds, the UK government signalled its intention to stay the course with new strategies to accelerate onshore wind and electric vehicle adoption, aiming to exceed 90% renewable energy generation within the next 10-15 years and phase out the sale of new petrol and diesel cars by 2030, with hybrids permitted until 2035. While these measures signal broad commitment to the transition, it is important to acknowledge that other recent UK-related developments such as proposed electric vehicle taxes[6] and consultation on reducing support under the Renewables Obligation (RO) scheme[7], may disincentivise certain types of investment. That said, many technologies are increasingly economically viable without significant subsidies, which may partly explain this.
In 2025, the UK government's Department for Energy Security and Net Zero (DESNZ) launched a consultation on transition plan requirements, and TPR established a working group to consider practical aspects of transition planning[8]. Trustees may wish to familiarise themselves with transition planning and consider how it could strengthen climate governance and long-term value. The latest report from the Thinking Ahead Institute (TAI by WTW)[9] on the subject highlights that effective transition planning should go beyond decarbonisation, addressing biodiversity, social justice, and circular economy principles, as these are all interconnected and part of credible, long-term system solutions.
Additionally, the UK made significant progress toward adopting the International Sustainability Standards Board's (ISSB) sustainability disclosure standards by launching consultations in June 2025 on UK Sustainability Reporting Standards (UK SRS) aligned with IFRS S1 and S2. Final UK SRS standards are expected to be published shortly for voluntary use, with mandatory requirements for large and listed companies likely starting in 2026. These developments seek to ensure UK companies will report in a way that is aligned with global markets, supporting comparability and reducing fragmentation in sustainability reporting.
Building on 2025, trustees may now look ahead to 2026, based on guidance from TPR bulletins, with a renewed focus on governance, risk management and stewardship that reflects the interconnected challenges and opportunities, with two focus areas standing out:
As we move into 2026, trustees looking to support further progress in this area could explore incorporating system-level considerations into their decision-making, whilst continuing to work with asset managers and stakeholders.
This article has been prepared for general purposes only and does not purport to be and is not a substitute for specific professional advice. While the matters identified are believed to be generally correct, before any specific action is taken, specific advice on the circumstances in question should be obtained.
