The government’s plans to extend Taskforce for Climate-related Financial Disclosures (TFCD) to more companies will improve pension schemes’ ability to comply with reporting standards, according to the Pensions and Lifetime Savings Association (PLSA).

The PLSA argued that the lack of consistent company reporting is preventing pension funds making climate aware investment decisions, with schemes with more than £5bn in assets under management and authorised master trusts set to be required to start TFCD reporting from October 2021.

A consultation on the matter closed on 5 May, with the Department for Business, Energy and Industrial Strategy proposing that publicly quoted companies, large private companies and limited liability partnerships be required to make climate-related financial disclosures.

Pointing to its own research from October 2020, the association noted that 63 per cent of respondents to it’s A Changing Climate report said they did not have access to sufficient information to be able to translate climate change risks into their scheme’s investments.

Consequently, the report had recommended that the government and regulators “move towards more widespread adoption of the TCFD recommendations, applying them not just to premium listed companies but to all issuers of debt and equity, and to all major banks, asset managers and insurers”.

However, PLSA still warned that it was “concerned” that the government’s plans for pensions scheme reporting “may ultimately fail as long as companies are not subject to similar expectations”, and called for “consistency in the specific metrics and requirements across all organisations”.

PLSA deputy director of policy, Joe Dabrowski, said: “The PLSA welcomes the government’s intention to extend TCFD to more companies. In due course, we would like to see these requirements extended to all listed companies, not just the largest.

“It is important that the largest companies lead the way on climate disclosure, and the standards that apply to them are as forward thinking and detailed as those on pension funds.

“As investors in many of these companies, pension funds and other institutional investors are dependent on this information to meet their own TCFD disclosure requirements and to be good stewards of their assets on behalf of millions of savers – transparent company reporting will be key to that.

“In our A Changing Climate report, it was demonstrated that – overwhelmingly – pension schemes take climate change seriously and want to invest in a climate aware way. Our research highlighted a number of systemic challenges that our members feel are halting progress, including a lack of consistent climate reporting throughout the investment chain. The government’s proposals will help address this issue.”

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