Climate risk disclosure regulation continues to advance towards the UK as new guidance for pension trustees and FCA

By Robin Hamaker-Taylor

On the 12th of March, a new draft guidance for pension trustees with aims to help trustees assess, manage and report climate-related risks was released by the Pensions Climate Risk Industry Group (PCRIG). The PCRIG was set up by the UK Pensions Regulator and the Department for Work and Pensions (DWP) with guidance compiled to help trustees meet upcoming legal obligations under a bill tabled in February this year, as recently reported by Acclimatise. In February, DWP tabled an amendment to the Pension Schemes Bill which will allow it to require climate risk disclosures. Disclosures are expected to begin by 2022.

The guidance includes the following main elements:

Part 1 of the guidance introduces climate risk as a financial risk to pension schemes, trustees’ legal requirements and the TCFD recommendations;

Part 2 sets out a suggested approach for the integration and disclosure of climate risk within the typical governance and decision-making processes of pension trustee boards, including defining investment beliefs, setting investment strategy, manager selection, and monitoring;

Part 3 of the guide contains technical details on recommended scenario analysis and metrics that trustees may wish to consider using to record and report their finding.

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