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Climate change disclosures extended by new Paris Agreement metric

Climate change disclosures extended by new Paris Agreement metric

28 Jul 2022

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What you need to know

  • 1 October 2021 marked the phased introduction of new climate-related governance and reporting requirements for authorised master trusts and occupational pension schemes with assets of £5bn or more. Trustees of in-scope schemes are required to produce an annual report (known as a TCFD report), which includes reporting on three metrics related to climate change. The requirements will be extended to schemes with assets of £1bn or more from 1 October 2022.
  • In November 2021, the Department for Work and Pensions (DWP) consulted on introducing a ‘portfolio alignment metric’, showing the extent to which a scheme’s assets align with the Paris Agreement goal.
  • The DWP has now finalised regulations on the new metric. These will apply in respect of the scheme year that is underway on 1 October 2022, for all schemes that are in scope of the existing regulations on that date. Trustees will therefore have to report on the new metric within seven months of the end of that scheme year.
  • The DWP has also finalised new guidance on how trustees should report on stewardship in their statement of investment principles and implementation statement. The Pensions Regulator (TPR) has also published a blog post commenting on how it will review TCFD reports, and on expected forthcoming Sustainability Disclosure Requirements (SDR). There have also been recent DWP announcements on social investing and a new pensions Green Nudge trial.

Actions you can take

  • For schemes in scope, discuss the new portfolio alignment metric with your investment consultant and assess what data might be required in order to calculate the new metric and make the necessary disclosures.
  • Ensure you are familiar with the new guidance on statement of investment principles and implementation statements.

The new portfolio alignment metric

The finer detail: Portfolio alignment metric and
other recent developments

For further information, please get in touch with Sarah Keighley, William Fitchew or speak to your usual XPS Pensions contact.

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