The timing for new climate-related disclosure requirements “will be tight”, Sackers partner, Stuart O’Brien, has warned, urging pension scheme trustees to get prepared as soon as possible.

The comments were made as part of the law firm’s fifth ESG guide, which focuses on new disclosure requirements being phased in for larger schemes and master trusts, as well as requirements introduced last year around annual implementation statements.

In particular, the firm emphasised the need for trustees to make sure climate-related risks and opportunities are integral to their usual governance procedures.

It argued that this will make it easier to comply with disclosure requirements "when they begin to bite", as well as providing a “sound framework” for investment decisions.

Indeed, it also highlighted The Pension Regulator’s ongoing consultation on the first part of its new combined code of practice, emphasising that TPR has made “clear” its expectation that trustees of all schemes should be considering climate-related risks and opportunities.

In addition to this, the guide flagged the inclusion of scenario analysis within the requirements, describing this as a “key element of the new draft regulations”.

However, it clarified that this must be undertaken in the first scheme year in which the regulations apply, which would require schemes with a 31 December year end to carry out scenario analysis within three months of the regulations applying, and within six months for those with a 31 March year end.

As such, Sackers has urged trustees to ensure that they can carry out the required analysis by the deadline applying to their scheme, as well as identifying early on who is going to conduct the scenario analysis and ensuring that sufficient time is given for training.

The guide acknowledged that this may be “new ground” for many trustees, stating however, that this further emphasises the need for trustees need to “get ahead of the game” and take advice from their actuarial and covenant advisers.

Discussing metrics and targets more broadly, the guide warned that the requirement for trustees to obtain data “as far as they are able” will be another key issue for trustees to consider.

As such, it suggested that trustees make enquiries of their managers as soon as possible to identify what metrics they are capable of supporting.

This was highlighted as a specific concern in relation to their capacity to report scope 3 emissions data, which considers all other indirect emission from activities of an organisation, occurring from sources that they do not directly control, as Sackers warned that reporting in this area currently is “poor”, with corporate reporting "frequently incomplete and at times highly volatile".

Commenting on the launch of the guide, O’Brien stated: “This is our fifth guide for trustees, something we could never have imagined when our first guide was launched in 2016.

“With the raft of new reporting obligations being introduced this year under the Pension Schemes Act 2021 our focus this year is on the disclosure aspects of ESG and climate change.

“With mandatory disclosure requirements to be introduced for larger schemes from 1 October 2021, climate change should be a key focus for trustees this year.

“Meaningful disclosures on climate will not be possible without trustees undertaking certain governance activities. With that in mind, the draft regulations not only tell trustees of schemes in scope what they must disclose, but also prescribe specific actions that must be taken first.

“This is new ground for many and timing will be tight for schemes required to comply in 2021/22. We hope our guide helps by setting out these new requirements and clearly explaining the key points trustees will need to consider.”

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