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In June 2018, the Government said it would “update the law to require pension scheme trustees to consider the impacts of their investments from a changing environment, corporate governance and social trends.” It made new regulations clarifying what should be included in the Statement of Investment principles (SIP) that must be produced by trustees of occupational pension schemes with more than 100 members (SI 2018/998).

The requirements were introduced in stages. From October 2019, the scheme’s SIP must specify their policies in relation to financially material considerations (including ESG considerations) and in relation to voting rights and engagement activities. From October 2020, it needs to explain how any asset manager is incentivised to align its investment policy with the trustees’ priorities (See The Pensions Regulator, Investment guidance for trustees).

In March 2020, the Government launched a consultation on non-statutory guidance regarding aligning your pension scheme with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations and explained that it was proposing to take powers in the Pension Schemes Bill to require climate-change risk governance and TCFD reporting.

Clause 124 of the Pension Schemes Bill 2019-21 includes power to make regulations:

  • imposing requirements on scheme trustees with a view to securing that there is effective governance of the scheme with respect to the effects of climate change
  • requiring information relating to the effects of climate change on the scheme to be published
  • ensuring compliance with the requirements above.

In August 2020, the Government launched a consultation on proposals for implementation – Taking evidence on climate risk – improving governance and reporting by occupational pension schemes.

Documents to download

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