PLSA AC 21: TPR to launch discussion panels on measuring risk mitigation

The Pensions Regulator (TPR) has announced plans to set up a series of panels to engage with the industry, savers and employers on how it measures the mitigation of risk in areas such as climate change.

Speaking at the Pensions and Lifetime Savings Association (PLSA) Annual Conference 2021, TPR chair, Sarah Smart, explained that greater measurement of how pension scheme activities on issues, including climate change, are mitigating risk is needed.

“One of the things that's a real key issue for the industry at the moment at the savers is climate change and how we respond to climate risk within schemes," she said.

"There is regulation now about what schemes have to do in relation to that and requirements for us as a regulator to ensure that schemes are fulfilling that."

Smart clarified that whilst in the past TPR's activity in this area could be measured by how many schemes completed a compliant TCFD statement within the prescribed time, this doesn't "tell us anything about how that activity has mitigated the risk".

"So what we're looking to do now is to measure our activity in a way that means something for savers," she said, continuing: “What has our activity in relation to climate change done to reduce the risk for savings? Now, we don't have the answers actually in those areas yet.

“So one thing that we're going to do, and I'm delighted to announce this today, is we're going to set up a series of panels where why we can listen to industry, to savers, and to employers to help us with some of these new questions that we're asking ourselves.

“How we measure ourselves in relation to climate change, that's one of the things we'd really like to talk to industry about in in our new panel, what do you think our measures should be in relation to this objective?”

Commenting more broadly, Smart also raised a number of "interesting questions" that needed to be asked around diversity and inclusion, and what this can look like within the pension industry.

She said: "So for example, and I'm not providing answers to these, I'm just setting them out as questions we should ask ourselves: Do we think that there should be a maximum term for trustees that that sit on schemes, is that going to help diversity - but what about the fact that a lot of schemes struggle to get member-nominated, employee-nominated trustees?

"How do we control for biases in member nomination trustee elections, even though elections are something that member trustees often think are really really important to ensure the members voices is not muted in any way?

"How to get diversity of thought in the Local Government Pension Scheme, pensions committees when we have very little influence in who sits on those committees?

"And how do we ensure diversity in independent trustee companies, when often a requirement for for joining a company or becoming a trustee is that you have to have been a trustee before, and that can limit some aspects of diversity in those areas.

"I think these are really important questions that we as an industry need to ask ourselves about how we get more diversity.

"There's an industry working group that's thinking about things like this, they met twice already this year, and I'm really looking forward to working with them to see how we take this forward."

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