Guest comment: Entering the age of climate risk reporting

As the owners of over £2trn of assets, UK pension schemes have a massive role to play in action on climate change risks.

The ACA is supportive of aligning the reporting and governance of pension schemes on climate-related risks to the Taskforce for Climate-related Financial Disclosures (TCFD) requirements.

Whilst it is positive that some schemes have started to consider and take account of climate-related risks in investment matters, our recent Pension Trends Survey findings show that many schemes have a long way to go to catch up with the ambitions of the government and industry.

The ACA believes the implementation of the TCFD requirements will need to be flexible and evolve as knowledge and experience of climate risk management develops in the UK pensions industry.

To help schemes implement effectively and efficiently, we have called for The Pensions Regulator to produce an Annual Climate Risk Management Statement to guide trustees in this area.

This year’s survey underscores that defined contribution (DC) schemes are falling some way behind defined benefit schemes in both recognising climate risks and in reviewing how investments might need to be adjusted to mitigate, or take advantage, of climate challenges.

Whilst master trusts are shaping their default funds to take account of climate risk, it seems many traditional DC schemes are relying on members to mitigate risk through their self-select fund options.

This is a concern given the vast majority of members’ funds are invested in default funds

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