Minerva weighs in on TPR climate guidelines

September 10, 2021

In July, The Pensions Regulator (TPR) announced an eight-week consultation to shape their new guidance for trustees to meet tougher standards of governance in relation to climate change risks and opportunities. Minerva has submitted a response to the new guidelines.

The consultation, which ended on August 31, addresses the new requirements intended to improve the quality of climate governance reporting that British trustees of certain schemes will face from October 1, 2021. The new legislation will align UK pension reporting standards with the Taskforce for Climate-related Financial Disclosure. The guidance describes what trustees will need to do and report on in order to comply with new legislation, as well as the TPR's approach to imposing monetary penalties for non-compliance.

The guidance may also prove useful to trustees not affected by incoming legislation that wish to conduct do their part in greening the finance sector and improve the governance and resilience of their schemes. David Fairs, TPR's Executive Director of Regulatory Policy said upon the release of the consultation:

"If trustees do not adequately consider climate-related risks and opportunities, or exercise effective stewardship, pension scheme investment performance and funding may suffer, which could mean savers missing out... We want to work with trustees, and their advisers, to ensure climate-related risks and opportunities are considered as key elements of scheme governance and would we welcome feedback on the best way to deliver this."

Minerva provided a response to TPR's consultation, ensuring that best-practice principles are put forward for the successful implementation of the new guidelines. Minerva pushed for more ambitious approaches to addressing climate risk, such as embedding climate into every area of fund governance and ensuring the relevant training and expertise is prioritised. An emphasis was also placed on providing more examples of actions that trustees 'should' take rather than simply those they 'must' take to comply.

Minerva also highlighted the need for closer alignment with the soon to be published Ministry of Housing, Communities and Local Government requirements for local government pension schemes, which will likely be with regard to data quality metrics. Minerva recognises that, particularly in the early days of the net-zero transition, the necessary data may not be available, and if it is it may be inconsistent or selective. This needs to be accounted for and measured in any TCFD reporting. Misaligned guidelines will only add to the complexity of gathering, organising and measuring climate data.

To find out more about Minerva's views on the latest TPR consultation and how we can help you comply with the TCFD guidelines, say hello@Minerva.info.