Pension scheme trustees have been urged to use The Pensions Regulator's (TPR) feedback on recent climate-related disclosures as an “opportunity” to improve their climate-related actions.

TPR recently published its second annual review of climate-related disclosures, revealing that while pension trustees are acting to address climate risks and opportunities, there is room for improvement, particularly in relation to scenario analysis.

LCP senior investment consultant, Laasya Shekaran, said that the feedback provided by TPR should be useful in helping trustees focus their reports on being more meaningful, thereby driving forward positive real-world change.

“We encourage trustees to use this feedback as an opportunity to help better inform their real-world climate-related actions,” she stated.

In particular, Shekaran said it is "useful" that TPR acknowledged that climate scenario analysis has limitations, often not capturing the full extent of physical risks and tipping points.

“Pension scheme trustees are encouraged to apply qualitative overlays to their scenario analysis to better understand the full potential impact of climate change and, therefore, take action to address climate change risks," she continued.

“TPR recognises the importance of pension scheme covenant, noting that some of the reports it reviewed had omitted appropriate assessments of the climate risks and opportunities that their sponsors face.”

Cardano director, Lara Rutty, said she was also “delighted" to see TPR’s latest review highlighting the continued improvement in some trustees' climate risk analysis, as well as the need for trustees of all DB schemes to ensure they consider climate-related risks to the covenant.

“Covenant cannot be excluded from the climate conversation for DB schemes and integrating covenant into scenario analysis should be normal-course risk management for all trustees,” she continued.

“We have seen tangible benefits to properly assessing climate-related covenant risk across our clients - including amending journey plans and developing short-term contingency plans using qualitative scenario analysis to ensure better safeguarding of member benefits.”

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