Trustees face enforcement action if they fail to comply

The Pensions Regulator (TPR) has warned trustees to act to meet new climate change regulations and warned it could take enforcement action against funds that failed to comply with their obligations.

The TPR issued its warning alongside its new Climate Change Strategy aimed at driving the implementation of climate change regulations across the industry.

Pension funds are already required to produce a Statement of Investment Principles outlining their policies on a range of ESG issues, including climate change. From October 1 this year fund annual reports will have to include a statement on how those principles have been followed and declaring how trustees have voted on the implementation.

David Fairs, TPR’s executive director of regulatory policy, analysis and advice, warned trustees: “Where we do not see schemes complying with the rules, we will consider enforcement action.”

The TPR new strategy aims to push fund trustees to address climate change and to drive debate around climate change and pensions. The strategy also includes a commitment by reduce the TPR’s own environment impact.

As part of its strategy the regulator will also publish guidance to trustees outlining its approach the new regulations.

Fairs added: “It is clear that all schemes need to build their capacity in this area if they haven’t already.

“This should include devoting more board time to climate change, considering specific training, and, most importantly, integrating consideration of climate change right across decision-making.”

As part of its strategy the regulator will also publish guidance to trustees outlining its approach the new regulations. The requirements on disclosures were recommended by the international Taskforce on Climate-related Financial Disclosures (TCFD) and have been made a legal requirement by the UK Government in the Pensions Act 2021.

The regulations apply to all larger pension schemes and Master Trusts meaning 81% of pension scheme members and 74% of scheme assets will be covered by the disclosure rules.