The Pensions Regulator (TPR) has called on trustees to move beyond compliance and demonstrate leadership on climate and nature-related risks, as it steps up expectations on investment governance.

In a blog post, TPR’s climate and sustainability lead, Mark Hill, called on trustees to engage with the government’s consultation on mandatory transition plans, describing it as an opportunity for trustees to “shape what good looks like”.

“In today’s pensions landscape, awareness of and managing systemic risks is not a nice to have; it’s a core part of effective trusteeship,” Hill said.

“Climate change, nature loss, and other systemic risks are not abstract concerns.

“Where they are financially material, trustees must understand and manage them as part of their fiduciary responsibilities.

“Strong investment governance is essential, especially in complex areas such as environmental, social and governance (ESG) and private markets.”

He also emphasised that trustees should ensure that decisions are “long-term, well-evidenced, and subject to appropriate challenge”.

“This is not just about compliance, it is about leadership,” he said.

The intervention comes as part of a broader shift in TPR’s regulatory approach, with a sharper focus on systemic risks and long-term resilience.

The intervention forms part of TPR’s broader shift toward a more prudential style of regulation, with Hill highlighting that this change has a "sharper" focus on systemic risks and the extent to which trustees are embedding them into long-term investment governance.

Hill noted that the regulator’s market oversight team is also having more expert-to-expert conversations with schemes to support this shift.

Additionally, he highlighted the work TPR is doing with its industry working group, chaired by TPR executive director of market oversight, Julian Lyne, which aims to develop the thought process around practical approaches to transition planning for occupational schemes.

In particular, he said TPR wants to hear what existing initiatives and proposals can inform the group’s work, what is already being done by schemes around transition plans and what obstacles and challenges they are facing.

Hill also said the regulator is interested in the key questions UK-based occupational pension schemes have as they develop transition plans, as well as any particular considerations across different scheme types and asset classes.

He also posed several questions for trustees to reflect on, including around their confidence in the investment strategy of their scheme, their resilience to risks related to climate and nature, their consideration of long-term risks, and the adequacy of the information being provided.

However, Hill acknowledged that trustees are at different stages in their ESG journey, which he said was why the regulator is investing in its own capacity through joining the UN Global Compact.

In addition to joining the UN Global Compact, TPR has incorporated ESG content into its Trustee Toolkit, consolidated its ESG and climate guidance on its website, and has continued to share emerging best practices throughout the sector.

Hill encouraged trustees to explore the Taskforce on Nature-related Financial Disclosures (TNFD) framework to help inform their strategies and improve their understanding of risks such as deforestation, water scarcity, and ecosystem degradation.

“These tools can help trustees move from awareness to action and embed sustainability into investment strategies,” he said.

In terms of other action points that trustees should comply with outside of the TNFD framework, Hill suggested supporting credible transition plans and embedding sustainability into investment strategies.

“Systemic risks are complex, and the future uncertain, but the actions trustees can take now are clear,” he stated.

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