News for trust-based schemes
Climate change has been a pensions hot topic for some time now and, from 1 October 2021, the latest legislative requirements started being phased in. The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 will initially apply to trust-based schemes with assets of £5 billion or more, master trusts and authorised collective money purchase schemes. Schemes with £1 billion or more of assets will be required to comply from October 2022.
The regulations introduce new requirements reflecting the recommendations of the Taskforce on Climate-related Financial Disclosures intended to ensure trustees embed effective climate change risk governance activities and report publicly on how they have done so. This includes requirements relating to governance, strategy and risk management, requirements to select and calculate climate-related metrics and to set and measure performance against targets.
TPR will have discretion to administer a penalty for a report it doesn’t believe adequately meets the requirements, but the minimum mandatory penalty of £2,500 will apply for failure to publish the report on a publicly available website, accessible free of charge and within the required timeframe. The maximum penalty is £5,000 for individuals or £50,000 in any other case.
Given trustees’ fiduciary duty to be actively considering climate change as a likely financially material risk, schemes who are outside of scope for the time being may still wish to consider whether to voluntarily adopt some or all of the requirements.