The regulator should set out a common methodology for climate scenario analysis, the Defined Contribution (DC) Investment Forum has said, arguing that greater standardisation of reports should become common practice, so that it’s possible to compare like with like.

The DCIF's report, which analysed 14 DC master trust Taskforce for Climate-related Financial Disclosures (TCFD) reports, found that making comparisons between reports in terms of which master trusts are doing better or worse at managing climate risk is "almost impossible".

In particular, the report found that it is not possible either to compare the current levels of emissions nor the projected impacts between schemes, as emissions reporting varies due to methodology, data provider, inclusion of scope 3 emissions, and different approaches to calculating intensity measure.

In addition to this, it found that, for climate scenario analysis, differences in time horizon, use of example members, emissions scenarios and methodology of calculating impacts again made comparability between schemes almost impossible.

The DCIF also argued that it was unclear who benefits from publishing these reports, and who the reader should be, despite much resource having been spent on them, potentially pulling schemes, consultants and asset managers away from other issues, including acting on climate change.

Given these concerns, the DCIF argued that greater standardisation of reports should become common practice, so that it’s possible to compare like with like.

It also suggested that it would be useful for regulators to clarify the intended audience of TCFD reports, so that schemes better understand the audience to whom they are writing.

Author of the research, Nico Aspinall, stated: “Putting the responsibility to address climate change on trustee boards has been positive and has achieved much in terms of starting schemes upon the route of addressing climate change.

“However, creating the requirement to disclose the outputs of TCFD processes without a consistent template for reporting to be used across the industry highlights the complexity and confusion the financial services sector feels in terms of how it should be acting on climate risk.”

DCIF chair, Lorna Kennedy, added: “TCFD reporting has been a new challenge that the pensions industry has grasped admirably. But to make all the time spent on these reports worthwhile, more industry reflection is needed.

"We need to work together to make sure that these reports are more readily comparable, in order to get a clearer picture of how schemes are managing climate risk.”

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