A perceived lack of coordination across government departments on transition plan policy in the UK is causing confusion among pension schemes, according to one of the country’s main pension fund bodies.
“We would welcome the government establishing a cross-departmental taskforce or coordination mechanism to ensure coherence,” said Pensions UK in its response to a consultation on requirements for investors and companies to publish climate transition plans.
The consultation, which closed last week, was launched by the Department for Energy Security and Net Zero (DESNZ) to fulfil a manifesto commitment.
It ran in parallel to two other sustainability reporting consultations, from the Department for Business and Trade (DBT), including one that focuses on how the UK should adopt the International Sustainability Standards Board’s (ISSB) framework in UK Sustainability Reporting Standards (SRS)
This latter consultation also confirmed that the Department for Work and Pensions (DWP) will review existing regulations for pension scheme reporting based on the Task Force for climate-related Financial Disclosures (TCFD), as part of which it will consider the role of UK SRS.
In its feedback to DESNZ, Pensions UK, formerly known as the PLSA, said the TCFD reporting regime for pension funds had been very successful in certain aspects, but that the introduction of transition plans “has the potential to move the dial on climate reporting, evolving from backwards-looking risk management to forward-looking accountability”.
“This is a crucial point for pension schemes, which are long-term investors with fiduciary duties, and for whom the effectiveness of climate disclosures is not just about transparency, but rather meaningful action,” added the industry body.
However, it said the approach to policymaking needed to be more coherent and streamlined, with DWP also clearly needing to coordinate with DESNZ and DBT to avoid fragmentation.
“It must be clearer how the transition plans requirements form part of the wider climate reporting landscape, and what changes, if any, we can expect to see to other parts of that landscape to ensure that the introduction of transition plans is effective and meaningful,” Pensions UK wrote.
In advance of any legislation, the Pensions Regulator is convening an industry working group to develop and test a net zero transition plan template suitable for occupational pension schemes, which it will present to the DWP this year.
Last month, the Financial Conduct Authority said that it planned to streamline its sustainability reporting framework for asset managers, contract-based pension providers and insurers.
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