Pension trustees should expect to become subject to the same high levels of scrutiny as UK listed companies in relation to climate-related disclosure requirements.
A report produced by environmental legal group ClientEarth (70 page / 5.4MB PDF) showed that the vast majority of UK listed companies are failing to meet disclosure requirements on how climate change will affect their business as scrutiny grows in this area.
ClientEarth found that 40% of companies had not referred to climate change-related risk in the ‘principal risks and uncertainties’ section of their annual reports, and fewer than 25% of companies had clearly referenced the impact climate change will have on their business model. Although around 50% of companies had referenced some kind of target for reducing carbon emissions, the report said meaningful detail was often limited or missing.
The study follows the introduction of climate-related disclosure requirements for UK listed companies and pension schemes over the past year.
The government is consulting on mandatory climate governance, strategy and risk management requirements that come into force for the largest occupational schemes and authorised master trusts in October 2021.
Pensions law expert Carolyn Saunders of Pinsent Masons, the law firm behind Out-Law, said the ClientEarth findings would be a wake-up call to pension trustees.
“Pension scheme trustees must sit up and take note of the increasingly high levels of scrutiny faced by companies in this area. They too run the risk of being called out in public for a failure to demonstrate an adequate response to the climate emergency. This applies not only to the largest schemes within the scope of the new reporting regime, which comes into force on 1 October 2021, but to all schemes, whatever their size,” Saunders said.
“The issue isn’t going away; any trustees failing to put in place appropriate governance around climate risks and opportunities could find themselves facing negative headlines, pressure from members and unwelcome attention from the Pensions Regulator. Now is the time to act,” Saunders said.
More information is available in our guide for pension trustees on climate risk reporting
