The Pensions Regulator increases its focus on climate and ESG non-compliance

23 February 2023

A new campaign to make sure trustees are meeting their environmental social governance (ESG) and climate change reporting duties is being launched by The Pensions Regulator.

As part of the campaign, TPR will launch a regulatory initiative in the spring to check whether trustees are publishing important data on ESG. Emails are being sent to DB, DC and hybrid schemes making clear that TPR is analysing scheme return data to monitor compliance.

TPR is checking whether trustees of schemes with more than 100 members (unless exempt) have published a statement of investment principles (SIP) which details the policies controlling how a scheme invests, including consideration of financially material ESG and climate factors.

They must also publish an implementation statement (IS) – which shows how the principles in the SIP have been implemented.

A review of a cross-section of SIP and IS statements will follow in the summer. The outcome of this review will be shared with industry to highlight good practice.

TPR is warning trustees of schemes in scope that enforcement action may be taken against them if they fail to publish their SIP and/or implementation statement. TPR has the power to impose a fine up to £50,000 (where the trustee is a corporate body).

Since 2019, TPR has requested information through scheme returns in relation to SIPs and ISs. TPR is currently reviewing the SIP and IS data provided through the 2022 DC scheme return. Initial analysis has highlighted a number of schemes did not provide valid website addresses of the SIP and IS statements, and TPR will be communicating with these schemes next month.

Authorised schemes and those with relevant assets of £1 billion or more must also publish an annual climate change (or TCFD) report. Trustees of these schemes should provide the URL to the report in their scheme return. TPR will be issuing a statement on TCFD reports in the spring.

Nicola Parish, Executive Director of Frontline Regulation at TPR said:

“All savers deserve to be in well-governed schemes which protect their retirements by appropriately managing and reporting on ESG and climate related risks and opportunities.

“These reporting disclosures represent compliance with the basic requirements in relation to ESG and climate change, so it’s disappointing some trustees are failing to meet them.

“Trustees who fail to comply risk us taking enforcement action against them and I expect to see an improvement in compliance levels.”

Source: The Pensions Regulator
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