The Pensions Regulator (TPR) has set out its plans to support trustees through upcoming changes in climate change-related regulations and how it will enforce new requirements.

Its newly published Climate Change Strategy outlines what guidance it will be issuing to help trustees adjust, and reveals the regulator’s aims and objectives for the role of pensions in the fight against climate change.

TPR is aiming to create better retirement outcomes for savers by driving trustee action on the risks and opportunities from climate change, to influence debates around pensions and climate change, and to take part in the transition to net zero as a business.

The strategy comes as a a swath of new regulations around climate change relevant to pension schemes are coming into force, including climate risk reporting requirements and the government’s Green Finance Strategy.

Pensions Minister, Guy Opperman, welcomed TPR's strategy, stating: “By increasing oversight of climate change and giving it the weight it deserves they can provide better protection for pension savers from significant financial risk.

“In particular, I applaud the commitment to update the Trustee Toolkit, and to properly enforce compliance with the basics.”

TPR said it expects schemes to publish their relevant statements and reports, and it will launch guidance on its approach to the new Taskforce on Climate-related Financial Disclosures (TCFD) requirements and take enforcement action against those not meeting their legal duties.

It also plans to use its communications to “nudge” schemes to comply with legislation and use its guidance, and will work with the government, key stakeholders and other financial regulators to influence debate.

The regulator announced it will publish a Climate Adaptation Report before COP26 in November, which will outline its plans towards using the recommendations of the TCFD, where applicable, as a framework for its own management of climate risk.

Furthermore, it has set a net-zero carbon emissions target of 2030 for itself and will set out its plans to achieve this by 2024.

For its regulatory approach, TPR said it will focus on four areas: setting clear expectations, identifying risk early, driving compliance through supervision and enforcement, and working with others.

To set clear expectations, TPR said it will publish guidance on regulations outlined in the Pension Schemes Act 2021, share best practice TCFD reports, and set out a climate risk management plan for superfunds.

It will also update its modular code of practice to include modules on climate change and stewardship, and update the content on climate change in its Trustee Toolkit.

Commenting on the launch, TPR executive director of regulatory policy, analysis and advice, David Fairs, said: “Driving trustee action on the risks and opportunities from climate change will create better outcomes in later life for workplace savers.

“Our strategy outlines how we will help trustees comply with the new rules for larger schemes, but it signals work on climate change needs to happen right across the pensions landscape – climate change is a risk for schemes whatever the size or investment strategy. It is clear that all schemes need to build their capacity in this area if they haven’t already.

“This should include devoting more board time to climate change, considering specific training, and, most importantly, integrating consideration of climate change right across decision-making.

“Building capacity means trustees will be better placed to understand what climate-related issues mean for their scheme – and better able to make decisions which contribute to good saver outcomes.”

Hymans Robertson actuary, Lisa Deas, added: “We welcome TPR’s climate change strategy providing insight on the guidance and support trustees can expect over the next few years to help them manage climate risk and opportunities effectively.

"In particular, we welcome TPR’s plans to bolster the climate change content on the trustee toolkit which we had advocated in our response to the DWP’s consultation on ‘Taking action on climate risk: improving governance and reporting by occupational pension schemes’.

"This change will give all trustees access to free training materials to improve understanding of climate change and take direct action.

"The strategy also provides further detail on how TPR will support the new requirements of the Pension Schemes Act 2021 (which will see large pension schemes and all master trust and collective DC schemes having to report in line with the TCFD recommendations), in particular with guidance to support the regulations.

"Many schemes will welcome the plans to publish best practice example TCFD reports, albeit this isn’t planned until the regulations are reviewed in 2023 so will not inform the early rounds of reporting.

"We strongly welcome the measures designed to support smaller schemes who aren’t subject to the TCFD reporting requirements – in particular the planned guidance on taking climate change into account in integrated risk management.”

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