The Financial Conduct Authority (FCA) has outlined a timeframe to align its climate risk reporting requirements with those proposed in the Pension Schemes Bill.

Pensions Minister Guy Opperman has today welcomed Financial Conduct Authority (FCA) plans to usher in landmark climate risk reporting measures in 2022.

In a letter to the minister, the FCA has outlined a timeframe to align its climate risk reporting requirements with those flowing from the Pension Schemes Bill, currently making its way through the House of Commons.

The move will ensure asset managers and FCA-regulated pension schemes are required to report on their assets’ climate risks in line with recommendations from the internationally recognised Taskforce on Climate-related Financial Disclosures (TCFD).

Minister for Pensions Guy Opperman said:

I whole-heartedly welcome the steps outlined by the FCA to ensure climate reporting requirements are rolled out across its regulated community.

The FCA’s commitment highlights the coordinated approach we are taking to address the dangers of climate change, while also using it to seize green opportunities.

The UK was the first major economy to commit to reaching net zero by 2050 and it is vital we continue to build on this momentum.

Climate change is expected to have a significant impact on pension schemes’ assets and returns for savers, both through the risks of a warmer planet, and the transition to a lower carbon economy.

That’s why the government has prioritised ensuring that occupational pension schemes, as long-term investors, are informed and empowered to take action to address these risks and protect the retirement savings of hard-working people.

Similarly, personal pension savers, as members of occupational pension schemes, need to receive the same assurance that their provider is taking action on climate risk.

The Department for Work and Pensions’ ongoing consultation, Taking Action on Climate Risk: improving governance and reporting by occupational pension schemes, proposes a wide ranging set of measures to introduce this.

Among the activities required would be calculating the “carbon footprint” of pension schemes and assessing how the value of the schemes’ assets or liabilities would be affected by different temperature rise scenarios - including the ambitions on limiting the global average temperature rise set out in the Paris Agreement.

The Pension Schemes Bill, set for Second Reading on Wednesday October 7, contains the legislation necessary to enact these measures.

More information

Read the correspondence between Minister for Pensions Guy Opperman and the FCA’s Interim Chief Executive Christopher Woolard.

Read DWP’s consultation on climate risk reporting, which is due to close on October 7 2020.

The Taskforce on Climate-related Financial Disclosures is a global, private sector led group assembled in December 2015 at the instigation of the international Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, which was then chaired by Mark Carney. They set out recommendations for organisations – non-financial as well as financial companies, including banks, insurers, asset managers and pension funds – to report on how they are managing climate risk. For pension schemes, it includes the requirement to report the emissions of their portfolio, and how their investments would perform under a range of temperature rises, including a world where temperature rises are limited to 2 degrees or below.

Published 2 October 2020