TPR emphasises compliance with ESG and climate reporting duties
18 April 2023
The Pensions Regulator (TPR) is increasing its focus on environmental social governance (ESG). ESG measures how businesses integrate with environmental, social and governance practices into operations, as well as its impact and sustainability.
TPR has said:
‘‘We want trustees, and their advisers, to be aware of our expectations now. And we want them to understand why this is so important, so they’ll be motivated to meet those expectations.
TPR has launched a campaign to make sure trustees are meeting their ESG and climate change reporting duties.
Financially material ESG factors, including but not limited to climate change, may affect the financial performance of a pension scheme’s investments or a sponsoring employer’s covenant.
So, if trustees fail to consider these factors, their savers’ pensions may be at risk.’’
TPR want to see trustees demonstrate that they are considering these factors and properly protecting their savers’ pensions. TPR will check that trustees of schemes with 100 or more members have published a statement of investment principles (SIP), which details the policies for how a scheme invests, including consideration of financially material ESG factors including, but not limited to, climate change. Trustees must also publish an implementation statement (IS) – which shows how the principles in the SIP have been implemented.
TPR further stated:
‘‘This is a basic requirement and it’s a vital way of trustees demonstrating they are protecting savers’ retirement outcomes from risks.
We are monitoring the situation and expect to see compliance improve. We are warning trustees of schemes in scope that enforcement action may be taken against them if they fail to publish their SIPs and/or IS.
We do this in the hope it will drive compliance and avoid us using our powers, which include a fine of up to £50,000 (where the trustee is a corporate body).’’
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