The Pensions Regulator will be setting up an industry working group on climate change, with the goal to produce guidance for pension schemes in this area.
This was one of the measures included in the government’s Green Finance Strategy, published on Tuesday (July 2), which set out plans to increase investment in sustainable projects and infrastructure, while ensuring the UK meets its 2050 net zero carbon emissions target.
The strategy also included setting expectations for publicly listed companies and large asset owners, such as pension funds, to disclose by 2022 how climate change risk impacts their activities.
TPR will be in charge of co-establishing the working group, which will focus on producing guidance for pension schemes on climate-related practices across governance, risk management, scenario analysis, and disclosure.
The watchdog expects to consult on this guidance in late 2019 with a view to putting it on a "statutory footing during 2020", it stated.
As part of its role in this strategy the regulator will also be monitoring the field through questions on climate change in annual governance surveys of defined benefit and defined contribution schemes, it added.
According to Charles Counsell, TPR’s chief executive, climate change is no longer simply a social responsibility issue.
He said: "It is a core financial risk impacting broadly across business, the economy and markets.
"Climate change is a risk to long-term sustainability pension trustees need to consider when setting and implementing investment strategy, while many schemes are also supported by employers whose financial positions and prospects for growth are dependent on current and future policies and developments in relation to climate change.
"Tackling poor standards of governance and risk management in pensions are priorities for TPR and we welcome working together with other regulators to address these challenges for pension schemes."
Last week the regulator published guidance for DC schemes, which stated they will need to consider their members’ views on ethical investing.
The watchdog’s guidance followed new regulations from the Department for Work and Pension which will come into force from October 2019.
Pension schemes with more than 100 members will be forced to disclose the risks of their investments, including the ones arising from ESG, later this year.
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