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UK Pension Schemes Not Using TCFD to Drive Climate Strategy

A new white paper analysing the Task Force on Climate-related Financial Disclosure (TCFD) reports of UK pension schemes noted that the majority of assessed funds are not yet using the framework to inform and drive their climate investment strategy. Pensions for Purpose, which works with pension funds and asset managers to steer more capital toward impact investment projects, said this is due to limitations in data and the infancy of TCFD reporting (compulsory for large pension funds since October 2021), with some funds viewing these reports as “a compliance obligation”. “Climate risk is an investment risk in the portfolio – that’s why the regulations were put in place – to get pension funds to use the TCFD framework to uncover what level of climate risks they are exposed to and set targets to reduce these,” said Anastasia Guha, Global Head of Sustainable Investment at investment consultancy Redington, which sponsored the report. She said, while it may be easy to “fall into a compliance mindset”, asset owners should not allow TCFD to become “an expensive box-ticking exercise”. The white paper added that 75% of assessed funds use investment consultants to interpret data for TCFD reports, with the remainder asking their asset managers or the data source providers for the data. The existential threat of climate change has further raised questions about fiduciary duty, Pensions for Purpose added. Funds were split between advocating for risk-adjusted returns and considering the long-term impact on the world. “More government guidance for TCFD reporting on climate risk, as part of their investment risk assessment, would help trustees balance the pursuit of risk-adjusted returns with climate responsibility,” said Karen Shackleton, Pension for Purpose’s Chair and Founder. 

 

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