The government response to the Work and Pensions Committee’s (WPC) inquiry into pension stewardship and COP26 has been published, although it has rejected some of the committee’s recommendations.

The response provided updates on the work already undertaken in line with a number of the recommendations, including plans to consult on the UK's draft Technical Screening Criteria for the UK Green Taxonomy in the first quarter of 2022, ahead of legislating by the end of 2022.

However, the government rejected a number of the committee’s recommendations.

In particular, the government said that the recommendation for the Department for Work and Pensions (DWP) to publish information about levels of direct investments by pension schemes in its annual report was not "practically feasible".

It also rejected the recommendation that a single minister be appointed to lead on this work, stating that “global best practice on sustainability investment reporting requires co-operation and leadership from a range of stakeholders across countries”.

Instead, the government said that it will set up a “high-level Transition Plan Taskforce” to establish a best practice standard for transition plans, to support its push to become the world’s first net zero-aligned financial sector.

The government also said that it disagreed with the recommendation that The Pensions Regulator (TPR) should establish a working group to develop guidance for schemes looking to set a net-zero target.

"Significant progress has been made this year in encouraging pension schemes to sign up to a net-zero target, and investor groups such as the Institutional Investors Group on Climate Change (IIGCC) and UN-convened Net Zero Asset Owners Alliance (NZAOA) continue to collaborate to deliver on these commitments," it stated.

Despite this, the government acknowledged the committee’s concerns over the “difficulties associated with defining concepts which are in a state of rapid and ongoing development” in relation to the recommendation that TPR define net-zero alignment.

In light of this, it confirmed that, following the publication of the recent climate reporting consultation, the DWP and TPR will "work together to encourage pension schemes to align their investments with net-zero targets".

"The DWP intends to continue its ground-breaking work in this area," it said.

The regulations, which will now remain under consultation until 6 January following an extension, would require pension trustees to calculate and disclose a portfolio alignment metric setting out the extent to which their investments are aligned with the Paris Agreement goals.

Commenting on the government's response, WPC chair, Stephen Timms, said: “The eyes of the world may now have moved on from Glasgow and COP26, but the government must not let up in its efforts to forge a global consensus on the role pension schemes can play in achieving climate change goals.

“A minister with a clear responsibility to lead this task would show the government is serious about sharing best practice internationally, so it is disappointing it does not agree with the committee.

“What the government must do now is make sure that all the support and guidance is in place so that pension schemes and their investments can work towards helping to meet emission reduction targets.”

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