Lack of attention given to climate change in TPR’s funding code a ‘glaring omission’

The issue of climate change received “virtually no attention” in The Pension Regulator’s (TPR) new Defined Benefit (DB) Funding Code, LCP has stated, arguing that this is a "glaring omission".

LCP stated that, despite publishing nearly 200 pages of proposed funding rules and consultations, none of TPR’s own documents included reference to climate change, with one mention of climate change in the response to the first consultation – and was included because people who responded to the consultation said this was an important issue.

LCP pointed out that the omission also stands in contrast to TPR’s three year “Corporate Plan” for the period 2021-24 which identified “DB funding and the importance of active and responsible stewardship, particularly around climate change” as a key issue.

Explaining the issue, LCP said that it was concerned that, if TPR was not explicit about the importance of integrating climate considerations, trustees and schemes may not give the issue the “priority it deserves”.

To address this, LCP called on TPR to outline its key expectations on integrating climate risk into covenant, funding and investment risks in the code, to lend more weight to its already-published guidance and ensure that climate considerations are an “integral” part of key strategic decisions.

LCP partner, Claire Jones, commented: “Given the vital importance of climate change as an issue when assessing risks around investments and around the strength of the employer covenant, it is a glaring omission for TPR not to mention climate risk at all in its proposed funding code.

“If schemes are truly to adopt an ‘integrated’ risk management approach, all material risks need to be considered and this must include climate risk”.

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