The Financial Conduct Authority (FCA) will be especially “mindful” of occupational pension schemes’ information needs when the regulator develops climate-related disclosure requirements for asset managers, the FCA’s interim chief executive officer has said.
Christopher Woolard set out the intention in an email to pensions minister Guy Opperman on the back of the Department for Work and Pension’s consultation on climate-related disclosure requirements for trust-based occupational pension schemes.
Woolard said the FCA planned to implement consistent obligations for asset managers and contract-based pension schemes, and that implementing these was “important to facilitating DWP’s own policy proposals to improve climate-related governance and reporting by occupational pension schemes”.
The FCA was eyeing the first half of next year for a consultation on these rules, which would be about “client-focused” disclosures aligned with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD), he indicated.
The aim was to finalise the rules by the end of 2021, with new obligations coming into force in 2022. Under the DWP’s proposals, the largest UK workplace pension schemes have to publish certain climate risk disclosures by the end of 2022.
“Given the global nature of the industry, we will be mindful of the interaction with related international initiatives, including those that derive from the EU’s sustainable finance action plan, but consider that taking forward TCFD-aligned requirements is consistent with and complementary to those initiatives,” Woolard added.
Pensions minister pleased
The pensions minister said he “whole-heartedly” welcomed the steps outlined by the FCA.
“You are right to highlight the important relationship between asset owners and managers that will be crucial in ensuring the flow of climate change data and information throughout the investment chain and will ultimately lead to more effective disclosures,” Opperman wrote to Woolard.
“I urge the FCA to ensure that the rules on which you consult are comprehensive, applying in due course to all fund managers, irrespective of the assets they offer. Such requirements should be at the product level so that schemes and their members can see what is happening with the assets that they actually own.”
“I urge the FCA to ensure that the rules on which you consult are comprehensive”
Guy Opperman, minister for pensions and financial inclusion
The PLSA has called for a common climate risk reporting framework across the pensions sector and financial services.
Opperman also welcomed the FCA’s plans regarding contract-based pension schemes, saying “government has always been keen to ensure that the requirements on such schemes do not diverge unnecessarily from those placed on trust-based schemes”.
The FCA first floated an asset manager climate risk reporting duty in 2018. It has already consulted on climate-related disclosure requirements for premium-listed companies.
Beyond disclosure: Aviva calls for net-zero target
The legislation necessary to enact the measures consulted on by the DWP is contained in the Pension Schemes Bill, which is set for a second reading in the House of Commons on Wednesday.
Aviva last week called on the government to amend the bill so that auto-enrolment default pension funds are required to achieve net-zero by 2050, as opposed to only being required to disclose how they will assess and report on their exposure to climate change.
The insurer has set a 2050 net-zero carbon emissions target for the auto-enrolment default funds it manages and offers for employer pension schemes across the UK. These have £32bn (€35bn) in assets under management, according to a spokeswoman.
Aviva also said it was exploring the feasibility of a 2030 target, in line with the Intergovernmental Panel on Climate Change 1.5°C pathway.
As part of its strategy to achieve this, the insurer said it planned to invest over £5bn into low carbon equities and climate transition strategies across its default funds over the next 18 months and would look to increase this level of investment after that. The insurer is a member of the UN-convened Net-Zero Asset Owner Alliance.
Master trust NEST has also adopted a net-zero policy, as part of which it will move £5.5bn of equities into climate aware strategies.
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