The Task Force on Climate-related Financial Disclosure (TCFD) requirements have become a “compliance exercise”, The Pensions Regulator (TPR) climate and sustainability lead, Mark Hill, has said, suggesting that transition plans will move pension funds from “looking in the rear-view mirror” to implementing “forward-looking targets”.

Speaking at the Pensions UK Annual Conference, Hill stated that while TCFD “got climate impacts and risks on the trustee agenda”, by providing a framework to look at investment decisions that factor in climate impacts, “we are now at a point where it has gone into business as usual... it’s becoming a compliance exercise”.

“It's looking in the rear-view mirror [and] it is not very member friendly," he continued.

"So, I think we're at a very exciting time with the transition plan consultation.

"I think we do have an opportunity to look now about moving away from that backward-looking disclosure to a more forward-looking, more value-for-money approach to this, because at the end of the day, it's the transition planning that is key to this, not so much the output of the transition plan."

In June, the government announced a consultation on options ‘to take forward climate-related transition plan requirements in order to provide the market with credible and decision-useful information'. It also asked TPR to assess the practicalities of transition plans for pension schemes.

According to Hill, the process of getting to the transition plan is the “critical piece”.

“Yes, it must be a credible and a living document, but it's not the end in itself," he explained.

"The same as a TCFD disclosure is not the end in itself. It's the value that's generated with that process, understanding the risks, understanding the opportunities, helping you target your stewardship activity, helping you align with your fiduciary responsibilities, and having that forward look, to ultimately generate something that will add value to stakeholders."

Also speaking during the panel discussion with Hill, Pensions UK senior policy adviser, Olivia Sizeland, agreed that transition plans “will help to drive real-world impact. So, it is important that they go beyond just transparency. It's about setting out a strategic plan for how you, as an investing company, are going to take steps to reach net-zero targets”.

Industry professionals seemed to agree with this sentiment, as a poll of attendees at the event, 60 per cent of respondents agreed that transition plans can drive real-world decarbonisation.

In addition to this, 80 per cent of their organisations do have a climate commitment and target, 52 per cent of their organisations had developed or started work on a transition plan, with 29 per cent stating they had not, and 19 per cent saying it is in progress.

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