Taskforce on Climate-related Financial Disclosures reporting to become mandatory for larger pension schemes

The UK government has published proposals that will make reporting against the framework set out by the Taskforce for Climate related Financial Disclosures (“TCFD”) compulsory for larger pension schemes over coming years. Further, the proposals will require that pension schemes put in place appropriate governance arrangements to ensure that climate risks and opportunities are being considered by pension schemes, thereby discouraging tick-box reporting.

Below is a snapshot of the the key messages set out in the proposals:

• TCFD is a framework for managing and reporting climate-related risks and opportunities;

• The Government is consulting on mandatory TCFD reporting and compliance with climate governance requirements for pension schemes with assets of £1bn or more;

• Master Trusts and Collective Defined Contribution schemes also fall within the scope of the proposals. Consideration is also expected to be given to the requirements for LGPS funds by MHCLG;

• Governance requirements would commence on 1 October 2021 for schemes with at least £5bn of assets and on 1 October 2022 for schemes with at least £1bn of assets;

• Schemes will be required to submit their first TCFD report within seven months of their scheme year ending after 1 October 2021 (2022 for £1-5bn schemes) but no later than 31 December 2022 (2023);

• The proposals address requirements for scenario analyses and use of metrics and targets. It seems likely that schemes will be required to calculate the Weighted Average Carbon Intensity of their portfolios;

• Pension schemes will need to publish their TCFD reports online. 

Download our full summary here