Pension schemes have been encouraged to not fall into the ‘trap’ of thinking of the Taskforce for Climate-related Disclosures (TCFD) as a compliance reporting process.

Speaking at the PLSA Investment Conference 2023, Redington head of stewardship sustainable investment strategy, Paul Lee, urged schemes to think about it as a strategic opportunity.

“That’s what it asks you to do: It asks you to plan, to set in place frameworks, and to think about what climate change means to you as an investor,” he stated.

To fulfill these requirements, Lee said that schemes need to start early on their TCFD reports, warning that schemes can’t just get to the end of the year and put the numbers together.

“If you fall into that trap, you won’t be reporting very well, and you won’t actually be complying,” he continued.

“Try to think about it strategically; it’s an opportunity to really step back and think about it strategically.”

Schemes were also encouraged not to focus too much on the data, with Lee describing the available TCFD scope 3 data as “pretty terrible”.

He noted that pension schemes have been asked to report on TCFD before anyone else in the economy, and the data sourcing is therefore weak, gappy and problematic.

“The data points are poor, but directionally the data is useful,” Lee said. “So, think about the big picture and think about that year-on-year progress.

“It’s really important to look forward rather than to look back. Those new alignment mechanisms are really important. Focusing on what has been emitted in the last year or previous years doesn’t really help.

“What you want, particularly if you are thinking strategically, is to look where that direction of travel is taking you, where your portfolios are heading, and what you might need to tweak and change in your investment approach to help you get nearer to whatever objective you are setting.”

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