• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • About
  • Gowling WLG
  • Legal information
  • Privacy statement
  • Cookie Policy
  • Home
  • About
  • Public Law & Regulation
  • AI
  • Posts

LoupedIn

Pension Schemes Act 2021 and climate risk reporting

Published on January 26, 2021 by Joanne Tibbott and Ian Chapman-Curry

Pension Schemes Act 2021 and climate risk reporting


Key points

  • The Pension Schemes Act 2021 (PSA 21) gives the government the power to introduce regulations which will require trustees of occupational pension schemes to consider, in-depth, (and report on) how climate change will affect their scheme and its investments in line with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations  
  • The new requirements will be detailed in regulations which have been issued in draft and are currently subject to further consultation. As a result, the legal requirements will not take effect immediately.
  • The DWP’s policy consultation response and additional consultation was published at the end of January 2021. Along with the consultation were draft regulations and statutory guidance. In the draft regulations, it is proposed that the new requirements will start to apply to schemes with assets of £5 billion or over (as at the end of the first scheme year ending on or after 1 March 2020) from October 2021. Schemes with £1 billion or more of assets will be required to comply from October 2022.
  • The requirements will also apply to authorised master trusts and collective defined contribution (CDC) schemes from October 2021.

What are the new requirements on climate-related disclosures?

The long-term objective behind these new requirements is to protect members’ benefits against the physical risks of climate change and ensure that trustees are properly taking into account the risks and opportunities associated with the transition to a lower carbon economy.

  • Broadly, regulations made pursuant to the powers introduced by the PSA 21 (together with statutory guidance) will require trustees of relevant occupational pension schemes  to:
    • meet a number of climate change  governance requirements in line with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations ; and
    • to report on how they have complied with those requirements (with that report also being published on a publicly available website and signposted to scheme members).  Trustees must prepare their report within 7 months of their scheme year end date. ;
  • introduce a new element to the trustee knowledge and understanding requirements (TKU) to ensure that trustees of relevant schemes have the appropriate level of knowledge and understanding of the principles relating to the identification, assessment and management of  climate change risks and opportunities in relation to occupational pension schemes; and
  • give The Pensions Regulator powers to ensure compliance with any governance and reporting requirements, by issuing compliance and penalty notices.

The PSA 21 also introduces a power to make regulations to require  trustees to adopt prescribed assumptions as to future events, including steps that might be taken to achieve the Paris Agreement goal or other climate change goals.

What does this mean for trustees?

These new obligations build on the requirements that have come in over recent years in relation to Environmental, Social and Governance requirements. With the UK hosting COP26 this year, these issues are only set to gain more momentum and as asset owners, trustees have an important part to play in that. 

Compliance with the new requirements will not simply be a box-ticking exercise. Trustees need to understand and engage fully with these issues to be able to demonstrate they have complied with them. Those schemes that will be caught first (and therefore have to comply from 1 October 2021) should start engaging with these issues sooner rather than later.   

What does this mean for scheme sponsors?

Many sponsors will already be engaging from a corporate governance perspective on these issues and will be able to support trustees with the work they need to do (whilst recognising trustees will need to take their own independent advice).

The requirements to publish information by trustees could potentially increase reputational risk for scheme sponsors, particularly given the powers the Pensions Regulator will have to deal with non-compliance. Open and constructive dialogue and collaboration on these issues will be important.

Download our one-page overviews of the Pension Schemes Act 2021

Click here to download our one-page overview of the Pension Schemes Act 2021 and what it means for trusteesDownload
Click here to download our one-page overview of the Pension Schemes Act 2021 and what it means for employers / scheme sponsorsDownload

About the author(s)

Joanne Tibbott
View Joanne's profile

Joanne Tibbott helps clients to make commercial decisions that work for their businesses and pensions schemes.

    This author does not have any more posts.
Photo of Ian Chapman-Curry
Ian Chapman-Curry
View Ian's profile | See recent posts

Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.

  • Ian Chapman-Curry
    https://loupedin.blog/author/ianchapmancurry/
    The Victorian workhouse revisited - The Week in HR
  • Ian Chapman-Curry
    https://loupedin.blog/author/ianchapmancurry/
    Keeping the purse strings tight - The Week in HR
  • Ian Chapman-Curry
    https://loupedin.blog/author/ianchapmancurry/
    Get on your bike - The Week in HR
  • Ian Chapman-Curry
    https://loupedin.blog/author/ianchapmancurry/
    Return of the boomerang employee - The Week in HR

Joanne Tibbott and Ian Chapman-Curry

Filed Under: Analysis Tagged With: ESG and pensions, Pension Schemes Act 2021, Pensions, Pensions law

Views expressed in this blog do not necessarily reflect those of Gowling WLG.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

Primary Sidebar

Recent Posts

  • Heading back to prosperity – A green light for UK office developments
  • European Data Protection Board issues draft guidelines for data breach notifications
  • Restriction on Public Sector Exit Payments revoked (for now)

Footer

LoupedIn is the Official Gowling WLG Blog. Gowling WLG is an international law firm comprising the members of Gowling WLG International Limited, an English Company Limited by Guarantee, and their respective affiliates. Each member and affiliate is an autonomous and independent entity. Gowling WLG International Limited promotes, facilitates and co-ordinates the activities of its members but does not itself provide services to clients. Our structure is explained in more detail on our Legal Information page.

  • Home
  • About
  • Gowling WLG
  • Legal information
  • Privacy statement
  • Cookie Policy

Gowling WLG 2020

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

SAVE & ACCEPT