Trustees of smaller pension schemes should get on the “front foot” in implementing upcoming climate risk management frameworks, in line with the accelerated review timeline established by the Department for Work and Pensions (DWP), PwC has said.

The comments come amid the DWP consultation on draft regulations and statutory guidance, which would implement new climate risk governance and reporting requirements for large schemes, those with more than £5bn in assets and authorised master trusts.

However, PwC said that whilst the consultation focuses on larger pension schemes, it is important for smaller schemes to get on the front foot, recommending that trustees consider using the DWP guidance as a benchmark to inform their own climate risk programmes.

For larger schemes, the firm also recommended that trustees review the proposals against their current approach to assessing, managing and disclosing climate risk, to determine any changes that would need to be made, again referring trustees to the DWP statutory guidance.

In addition to this, it suggested that trustees use the non-statutory guidance published by the Pensions Climate Risk Industry Group when considering how to disclose in line with Taskforce for Climate-related Financial Disclosures (TCFD) recommendations.

It also stated that trustees must set, measure performance against, and review at least one target for at least one of the metrics selected to calculate and disclose against in their TCFD report.

Alongside new reporting requirements, the proposals will be introducing new requirements in relation to trustee knowledge and understanding around climate-related risks and opportunities.

Considering this, PwC emphasised that trustees must ensure they are able to properly exercise their functions in this regard, suggesting that they may want to consider undertaking training in order to ensure adequate levels of knowledge and oversight are in place.

It also noted that whilst there was an easement to scenario analysis requirements in the final proposals, trustees will still need to ensure they are able to undertake scenario analysis in the first year in which the requirements apply.

“As a first step for undertaking scenario analysis, trustees should consider developing qualitative assessments of the impact of various scenarios on the scheme, with a view to building out complementary quantitative analysis over time as methodologies develop,” it stated.

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