TPR to consult on climate reporting guidance and monetary penalty policy

The Pensions Regulator (TPR) has announced plans to launch a consultation on draft guidance for climate reporting regulations and its revised monetary penalty policy on Monday (5 July).

TPR executive director of regulatory policy, analysis and advice, David Fairs, announced the plans at the PLSA ESG Conference 2021, emphasising that the regulator wants to "see more than superficial tick-boxing” from pension scheme trustees on climate risk and opportunity reporting.

The guidance, which will sit alongside new climate reporting regulations, is expected to provide trustees with more clarity as to what is expected of them and what will happen if they do not comply, acting as “a sort of checklist of steps that trustees should tackle and report on”.

Fairs clarified that whilst the steps outlined are not exhaustive, completing them should allow pension scheme trustees to demonstrate good governance of climate-related risks and opportunities.

He also pointed out that the guidance is expected to treat “failures of governance activities more seriously than failures in reporting”, as TPR is hoping to see “a positive change in behaviour” from pension scheme trustees.

In light of this, TPR has also revised its monetary penalties policy, which outlines the regulators approach to imposing penalties for non-compliance, with this also to be included in the consultation.

Under the revised policy, TPR "must" issue a mandatory fine where trustees within the scope of the legislation fail to publish their climate change reports on a publicly available website accessible free of charge and within the required timeframe.

“Non-compliance schemes will be fined at least £2,500, with any consecutive penalty of at least £5,000," Fairs explained. "And for other breaches of climate change, governance and reporting regulations we've got a range of enforcement options, including the discretion to issue a penalty notice."

The consultation is expected to run for eight weeks, and comes alongside the Financial Conduct Authority’s consultation on introducing similar climate reporting and disclosure requirements for asset managers and FCA-regulated pension schemes.

Fairs stated: "This is your opportunity to have your say on how the new regulations will work in practice and on this, as in other areas, we do want to work with trustees and advisors, we do want to hear feedback on what is the best way to deliver and enforce the new guidelines.

"These are really important regulations that will impact how you run your scheme and help you assess whether or not your investment funding strategy is resilient enough to stand up in the face of climate change.

"So this is really your chance to have a say about how those regulations are implemented and enforced."

Fairs also highlighted TPR’s recent DB pension survey, which included questions in relation to climate change risks and opportunities for the first time, noting that many schemes are devoting “relatively little or no thought” to these issues.

“Now I absolutely recognise our DB survey took place some time ago, the markets evolving rapidly", he clarified, “and I suspect, if we were asked the we were to ask the same question today that those numbers would have changed quite significantly.

“But I think it does illustrate that trustees have got quite a lot to do, they do need to step up when it comes to considering climate related risks and opportunities."

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