The Pensions Regulator (TPR) will be responsible for co-establishing an industry working group on climate change guidance for pension schemes, the government’s Green Financing Strategy has revealed.

The report, published today (2 July), said that the government and regulator sponsored working group will deliver best-practice guidance across governance, risk management, scenario analysis and disclosure.

The regulator will consult in late 2019 “with a view to putting it on a statutory footing during 2020”, as part of the governance code required by occupational pension schemes.

In a joint regulatory statement on climate change, TPR chief executive, Charles Counsell, said: “Climate change is no longer simply a social responsibility issue. It is a core financial risk impacting broadly across business, the economy and markets.

“Climate change is a risk to long-term sustainability pension trustees need to consider when setting and implementing investment strategy, while many schemes are also supported by employers whose financial positions and prospects for growth are dependent on current and future policies and developments in relation to climate change.

“Tackling poor standards of governance and risk management in pensions are priorities for TPR and we welcome working together with other regulators to address these challenges for pension schemes.”

In addition to the working group, the regulator has updated its defined contribution investment guidance to clarify trustees’ duties in relation to environmental, social and governance issues and has also contributed to the revised Stewardship Code consultation in order to improve investment governance.

TPR will also be required to monitor the landscape through questions on climate change in annual governance surveys of defined benefit and defined contribution schemes.

The Green Finance Strategy recognises the role of the financial sector in delivering global and domestic climate and environmental objectives.

According to the report, pension trustees are increasingly seeking to understand the financial risks opportunities arising from climate change, with government supporting this through “pensions regulations and initiatives to strengthen resilience to climate change and natural disasters”.

The government said it will work closely with TPR, the Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulation Authority in order to introduce the Task Force on Climate-related Financial Disclosures (TCFD).

Last week, Pensions Minister Guy Opperman said that the updated guidelines delivered by TPR, requiring trustees to publish their statement of investment principles online will have a “significant part to play in tackling the climate emergency”.

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