UK pension fund schemes will be required to report on the alignment of their investments with the global climate goal to limit warming to 1.5°C, according to new measures introduced today by the Department for Works and Pensions (DWP).
The announcement marks the next step in climate transparency requirements for the country’s pension schemes, following legislation last year mandating the publication of Task Force on Climate-related Financial Disclosures (TCFD)-based disclosure.
The TCFD was established by the Financial Stability Board with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017, and have become the industry standard for climate-related disclosure. Last year, the TCFD updated its recommendations, adding guidance for companies to disclose their net zero transition plans, and for financial firms to report on their portfolio alignment with global climate goals.
In a published response to a consultation launched last year by DWP following the updated TCFD guidance, the DWP stated:
“We are…seeking to broadly align with the TCFD’s updated guidance in this area and codify such a requirement for UK occupational pension schemes, as we did when aligning trustee reporting with TCFD’s 2017 recommendations.”
DWP’s initial TCFD requirements came into effect last year, initially applying to pension schemes with assets greater than £5 billion, and expanding to £1 billion schemes later this year. Accordingly, the new rules will apply to funds representing more than 80% of UK pension scheme members as of October ths year.
Secretary of State for Work and Pensions Thérèse Coffey said:
“We are making sure our pensions can be a superpower delivering prosperity for people – and the planet – by making changes to the rules about how they are managed.”