The Pensions Regulator (TPR) has warned trustees of schemes with 100 or more members that enforcement action may be taken against them if they fail to publish their statement of investment principles (SIP) or implementation statement (IS).

In a blog, TPR executive director of frontline regulation, Nicola Parish, explained why the regulator was putting emphasis on compliance with ESG and climate reporting duties in 2023, and called on trustees to ensure they were aware of its expectations.

She said that trustees failing to consider financially material ESG factors may be putting savers’ pensions at risk and the regulator wanted to see trustees demonstrate that they are considering these factors.

TPR previously confirmed that it will be checking whether trustees of schemes with 100 or more members have published a SIP and IS to help drive compliance, warning that fines of up to £50,000 could be imposed where the trustee is a corporate body.

The regulator also asked for trustees provide a web address to their SIP and IS since 2022, revealing that, of the 220 defined contribution schemes that should have provided a web address, only 180 did so.

“Of the 40 that did not, in the majority of instances, either the web address for the SIP and IS were missing or the addresses given did not work,” Parish stated.

“This is a basic requirement and it’s a vital way of trustees demonstrating they are protecting savers’ retirement outcomes from risks.

“We are monitoring the situation and expect to see compliance improve.”

Parish also noted that TPR wanted to continue to improve the quality of trustees’ governance and reporting of climate-related risks and opportunities.

The regulator expects trustees of schemes in scope to have regard to the Department for Work and Pensions’ (DWP) guidance, report on a new portfolio alignment metric and, for trustees that are reporting for the second time, consider scope 3 emissions.

Trustees who fail to comply will receive a mandatory penalty of between £2,500 and £50,000.

“Most trustees appear to have made a reasonable effort to comply and have adhered to the spirit of the disclosures,” said Parish.

“We expect reporting to evolve and improve as industry gains experience and data and analytical techniques develop.”

On climate scenario analysis, the regulator noted that its review had shown a wide variation in the climate scenarios adopted by trustees, although most were broadly aligned with the three described in DWP guidance in June 2021.

Over time, TPR expects the market to develop a degree of consensus, but it was concerned about the integrity of some scenarios more generally.

Parish urged trustees and their advisers to think carefully about the narratives and outcomes of the scenarios they chose, noting that there were some who appeared to regard these reports as “merely a tick-box exercise”.

Finally, TPR said that trustees may wish to consider developing a climate action plan.

“We will continue to support trustees in meeting our expectations, including producing updated covenant guidance relating to defined benefit schemes this year, which will include information on assessing climate impact on employer covenant,” Parish concluded.

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