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September 15th brings with it National Pension Awareness Day, an occasion which raises awareness of the importance of preparing and saving for retirement.
While people in general need to put their minds towards setting up a pension which will protect their future prosperity, so too must businesses consider implementing ethical and robust schemes.
To that end, trustees need to take steps to identify and effectively manage climate risk across their pension schemes to ensure compliance. This is ahead of the introduction of further Task Force on Climate-related Financial Disclosures (TCFD) requirements.
The government confirmed that it would forge ahead with TCFD regulations for schemes with assets over £5 billion from October 1, 2021.
The regulations encompass governance, strategy and scenario analysis, risk management, metrics and targets and reporting outcomes, all of which must be complied with to meet the full TCFD requirements.
In particular, the regulations recommend that trustees ensure they have sufficient knowledge of climate change, are setting appropriate investment beliefs and that processes for setting the scheme’s investment and funding strategy properly address climate issues.
In relation to risk management, trustees have been urged to identify and record any climate related risks and their source, prioritise the consideration of risks and determine and implement a management strategy for them.
Concerns were previously raised regarding trustees' abilities to meet the requirements, with industry research recently revealing that one-fifth (20%) are still unclear upon TCFD rules.
Paul Clayton, Compliance & Risk Principal Consultant and Pensions industry expert for MERJE, says: “The October deadline is quickly approaching so we understand that many businesses will feel overwhelmed about these complex regulations, which seek to recognise the important role UK pension schemes must play in combating climate risk.
“What we’re glad to see is that the government is taking positive steps to introduce legally binding climate targets, while highlighting the role that the Financial Services industry can play in facilitating change.
“TCFD will greatly impact the pensions industry over the coming months, so the challenge for schemes is to continue to remain on the front foot as these changes come into effect. Trustees need to ensure that the pathway to achieving TCFD compliance is straightforward.”
The Financial Conduct Authority is also consulting on proposals to extend the requirements to asset managers, life insurers and FCA regulated pension providers
If you’re looking for specialist knowledge to ensure your business is taking the right steps to ensure that your company pension scheme is TCFD compliant, please get in touch with our team about the best recruitment options for you. Find out more about our Compliance recruitment experts here.
