TPR urges pension trustees to take note of transition plan recommendations

The Pension Regulator has urged pension trustees to familiarise themselves with recommendations from the UK Transition Plan Taskforce (TPT).

While noting it is not mandatory to adopt any of the TPT recommendations, Mark Hill, TPR climate and sustainability lead, has encouraged trustees to take note of the taskforce’s guidelines along with those from Taskforce for Nature-related Financial Disclosures (TNFD) and Taskforce for Social Factors (TSF).

“The UK’s TPT disclosure framework and guidance provides resources to support producing credible, consistent and comparable plans. Trustees should ensure their advisers have the appropriate skills and expertise so that they can make well informed decisions and put together effective transition plans,” Hill said in a recent TPR blogpost.

Hill’s blog – Trustees, take stock and plan for wider ESG risks and opportunities – was published yesterday (21 February), the day when senior UK pension stakeholders gave evidence to the Work and Pensions Committee on pension funds’ fiduciary duty regarding climate change.

Originally set up on the back of COP26, TPT was tasked with designing expectations that regulators could use when they developed the rules. Last month, it was announced that the government extended TPT’s mandate until at least 31 July 2024 to align with the new Transition Finance Market Review (TFMR) – which was designed to explore how to create the conditions for scaling transition-focused capital raising with integrity.

The newly-launched review will also consider what the UK financial and professional services ecosystem needs to do to become a leading hub for, and provider of, transition financial services, by facilitating UK and international companies and investors to achieve credible net zero pathways.

Hill said: “Transition plans provide a pathway to achieve sustainable investment. Good plans will support trustees, whether that be the integration of risks and opportunities into investment valuations or improving data and reaching informed decisions on investments so that there is increased capital allocation to climate solutions.”

Adding that trustees “should already take into account financially material considerations over the appropriate time span of their investments,” and stressing that it is “fundamental to delivering good saver outcomes”.

Hills comments follow the UK’s Department for Work and Pensions (DWP) launching the Taskforce on Social Factors for the nation’s pensions industry, last year. 

Among its recommendations, the TSF has called for pension trustees to set “objectives” for their consultants in relation to the way they approach social factors, and to consider asset managers’ performance on social factors when awarding mandates.

Additionally, the DWP and TSF will host a roundtable discussion on 7 March for the launch of TSF’s guide for social factor considerations in pension scheme investments, following the conclusion of its recent consultation.

What next for trustees?

January’s World Economic Forum saw 320 organisations from some 40 countries accounting for $14trn in assets under management committed to making nature-related disclosures based on TNFD recommendations, Hill noted.

“The direction of travel is clear. The case for becoming familiar with TNFD and arguably requirements of the TPT and TSF will only become stronger.”

“Evolving reporting to include nature and social factors, supported by transition plans and developments in TCFD reporting practices, may seem daunting. However, it should be possible by incrementally building on the foundations of TCFD,” Hill added.

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