The UK’s pension regulator (TPR) is being asked to drive forward a ‘transition planning code’ for asset owners.
TPR appointed a group of around 20 investment and climate specialists to a Transition Plan Working Group (TPWG) last year, to help it “develop and test a voluntary net zero transition plan template fit for occupational pension schemes”.
Members of the group include representatives from the Asset Owners Council, the Association of Pension Lawyers, the Investment Consultants Sustainability Working Group, Pensions UK and the Trustee Sustainability Group.
The TPWG recently held its final meeting at the end of January, ahead of the development of a report by TPR, which is expected to be presented to the Department of Work and Pensions (DWP) next month.
The template was meant to draw on asset-owner guidance produced by the UK’s Transition Plan Taskforce (TPT) in 2024 on how to disclose a climate plan – not how to develop and implement one in the first place.
But multiple TPWG members told IPE that there was broad consensus among the group that a disclosure-only approach may be unhelpful for pension funds, and risked quickly becoming a ‘tick-box’ exercise.
As a result, some in the group have asked TPR to develop a new Transition Planning Code (TPC).
Writing on LinkedIn on Thursday, Mike Clark, the founder of Ario Advisory, and a participant in last month’s meeting, said “wise asset owners” within the group had “focused on capital allocation to economic activity that supports the transition, and reporting on THAT”.
On that basis, he added, “the TPC was born”, combining the UK Stewardship Code with the TPT’s guidance, to lay out ways that pension funds should think strategically about decarbonisation.
The proposal builds on a recent report from the Principles for Responsible Investment (PRI), which stressed the need to “mak[e] the distinction between transition plans – the formal output – and transition planning – the ongoing process”.
“Investors can benefit from transition planning as a strategic tool, not simply for reporting,” it continued.
“Building on the foundation set by established frameworks, many investors are now deepening their own approaches to transition planning, signalling the emergence of a more sophisticated form of ‘transition intelligence,’ designed to help navigate the complex, interdependent risks and opportunities on the path to net zero,” the PRI suggested.
“This is based on the notion that beyond developing and disclosing transition plans – which are widely recognised as useful – there is value in taking a strategic and comprehensive approach to understanding how the transition will unfold and how to respond or contribute.”
TPR did not answer questions about the output of TPWG, or whether it would consider producing a stewardship-focused framework, but a spokesperson confirmed the group had “had a series of productive sessions looking at the practicalities of transition plans for pension schemes”.
“TPR will share the group’s findings later this spring,” the spokesperson added.
