Climate Risk and TCFD Considerations for Trustees
As addressing the climate crisis gains increasing traction worldwide, managing climate risk will become a top priority for trustees. The timeline below sets out future climate-related regulation for pension schemes. In January 2021, the DWP proposed widening the scope of the regulation to cover employer covenant and scheme funding. This means trustees will need to do more than just consider Scheme investments to meet their climate regulation obligations.
The UK government is the first in the world to make climate risk reporting a statutory requirement. While this only catches the largest pension schemes at the moment, it is expected to be extended to pension schemes of all sizes by 2023.
In this paper, we will introduce climate scenario analysis, set out some “quick win” actions to put ESG on the agenda, detail upcoming climate regulation, particularly TCFD (Task Force for Climate-related Financial Disclosures) regulation as well as brief you on the latest climate science.
Key Takeaway
Climate regulation for pension schemes is increasing. Climate risks will need to be taken into account not just in your investment strategy, but also your covenant assessment and actuarial valuation.