Over a quarter of LGPS funds working to align with TCFD recommendations

Over a quarter (29 per cent) of Local Government Pension Scheme (LGPS) funds have already begun work to align with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, according to a survey by the Pensions and Lifetime Savings Association (PLSA).

Released as part of the PLSA’s ongoing webinar series for local authority members, the survey showed a relatively even spread in levels of awareness around the TCFD recommendations, and the government’s plan for all UK pensions to align with these as outlined in the July 2019 Green Finance Strategy.

A further 29 per cent of respondents stated that they were “just wrapping [their] heads round it”, whilst 22 per cent stated that they are aware of the call to align with TCFD recommendations, but are not sure what it means.

However, a fifth (20 per cent) stated that they had not heard about the recommendations and the potential need to align at all.

The consultation on aligning pension schemes with TCFD recommendations, which would see an amendment added to the Pension Scheme Bill, was announced at the PLSA conference in March and is scheduled to close on 2 July 2020.

Commenting on this, Brunel Pension Partnership chief responsible officer, Faith Ward, emphasised that whilst the consultation is not directly aimed at LPGS funds, it would be “really constructive” to hear from LGPS voices on this issue.

Echoing the call to engage, PLSA policy lead for investment and stewardship, Caroline Escott, added: “I agree that [the consultation] does have broader relevance, and I think that’s one of the really interesting things about the regulatory policy framework at the moment.

"We saw the LGPS as leaders in responsible investment… and in recent years, we have seen new investment regulations for the private sector really start trying to bring private schemes up to that level.

"One of the things we are keen to emphasise, is that a lot of the stuff happening in the private sector scheme sphere is coming down the track now for the LGPS funds as well in terms of statutory guidance in terms of pulling out climate risk for the pool of ESG risks and opportunities, that's coming down the track for LGPS funds as well.

Pointing to the work already underway by the Pensions Climate Risk Industry Group (PCRIG), and the recent launch of an ESG working group by PLSA, Escott emphasised that there is a range of resources to support LGPS funds and private sector schemes alike in communicating what they are doing for ESG.

Adding to this, Ward also highlighted the opportunity for the private sector and LGPS to work together to share best practice, pointing out that a number of "excellent examples" from the LGPS community that private sector can leverage.

The survey also collected information on whether LGPS funds had heard from stakeholders, asking what their plans were regarding climate or fossil fuels.

The majority (54 per cent) of respondents stated that this had been proposed as an agenda item at meeting, whilst 29 per cent stated that they had received a couple of letters, but seen “no real interest”.

Furthermore, whilst, just 5 per cent of schemes had failed to hear anything at all, over one in 10 had actually had a meeting disrupted by an activist group.

Escott added: "Investing in climate change is one of the big themes for the [PLSA] this year, it has remained that way even in the wake of a little bit of re-prioritisation of resources in the wake of Covid-19 as well.

"But its remained a priority not only because there's a whole load of regulation coming down the track, but also because we believe it is a systemic issue."

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