UK authorities commissions local weather danger evaluation by way of pension plans

UK pension plans with assets of at least £ 5 billion ($ 7.1 billion) will be required to assess and publicly report the risks of climate change in their portfolios from October, according to regulations presented to Parliament on Tuesday.

The new regulations, which are the subject of parliamentary debate, fall under the Pension Insurance Act 2021 and require trustees to identify and assess climate risks and opportunities that can affect investment strategies in the short, medium and long term.

Investors must also disclose the CO2 emissions of their portfolios in annual reports. You need to perform scenario analysis, select and calculate climate metrics that will affect the portfolio, and set climate goals and review performance against them.

For this purpose, investors will use the standards of the Taskforce for Climate-Related Financial Disclosures. The measures will be expanded to plans of less than £ 5 billion from 2024, the UK Department of Labor and Pensions said in a press release.

“These world-leading regulations that we are outlining today ensure that these risks are addressed with complete transparency,” said Guy Opperman, UK Minister for Pensions and Financial Inclusion, in the press release.

DWP said on its website that the UK will be the first among the leading developed nations to require pension fund trustees to incorporate, assess and report on the financial risks of climate change in their portfolios.

“We welcome the release of the proposed government pension climate reporting legislation that embeds TCFD requirements into pension fund disclosures,” said Will Martindale, sustainability group leader at consultancy Cardano, in an email.

Mr Martindale added that the regulation will create a level playing field and raise minimum standards for the use of climate-related metrics, climate scenarios and targets.

“Trustees will be relieved that there have been few material changes since the January consultation drafts,” said Claire Jones, partner and head of responsible investment at advisors Lane Clark and Peacock, in a separate email.

The government held a phase of consultation with the UK pension industry on a draft regulation in January and February.

Ms. Jones welcomed the government’s response to practical issues raised by industry participants during the consultation period, such as a new threshold for defined contribution plans that require scenario analysis. Plans with assets of at least 100 million pounds – instead of 250 plan participants – must at least assess the resilience of their strategies to a global temperature rise of 1.5 to 2 degrees Celsius.

Performance funds are also allowed to tailor the scenario analysis requirement to their three-year assessment, she said.

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