How pension trustees need to cope with ever-mounting climate regulation and find the time to create an impact.

The Department of Work and Pensions’ (DWP) climate risk reporting requirements are having a significant impact on the day-to-day operations of trustees and the firms that support them. 

The UK government and DWP has put the responsibility for leading the UK’s climate commitments squarely on the asset owners’ shoulders. Trustees now have unenviable task of wrangling a fragmented and confusing (or confused!) investment ecosystem to standardise portfolio and climate data and reporting.

It’s not easy being green

• The DWP regulation contains 258 points that require review and some for action.
• Implementing the regulation requires a review and potential overhaul of trustees’ existing governance and operations.
• The requirements continue to expand, even before the initial need to collate reporting data. A new set of requirements to provide a portfolio alignment metric was introduced in June 2022.
• Trustees need to acquire data from their supply chain who will often use different methodologies or data providers. The trustees have to normalise and make sense of the data they get back.

Looking to the future some things that may make this process easier or harder:

Easier

• More regulation is inbound for companies (investments within portfolio) which should improve range, quality and access to emissions data.
• More industry reporting will lead to greater data insights and enable techniques such as bench marking against other schemes.

Harder

• DWP climate risk regulation is likely to expand rapidly.
• Reporting is just the first stage; asset owner policies will be a key lever in the UK governments pledges.
• More regulation is likely coming such as TNFD.

How can pension trustees not just cope but thrive in these times of climate regulation?

Trustees must start to think about the long-term impacts and changes that will impact their governance and day to day operations. 

AMX has created a guide for pension trustees that aims to help structure an approach to the regulation, alongside some handy tips that can create long term capabilities. This sits alongside a range of tools that we have created for asset owners seeking to manage climate risk and create impact including stewardship services, voting technologies, climate data and TCFD reporting solutions. 

Photo by Jennifer Griffin on Unsplash