Climate change risk
In 2019, the Government published its Green Finance Strategy 8 which made commitments to steps the Government will take to ‘green’ the financial system. The climate change risk provisions in Part 5 of the Act support the Government’s expectation, set out in the Green Finance Strategy, that all large asset owners will make disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by 2022. The TCFD recommendations are the most widely used framework against which institutional investors report and assess exposure to the financial risk of climate change.
	Section 124 inserts new sections into the Pensions Act 1995, to provide a legislative framework for requiring trustees and managers of occupational pension schemes to make disclosures in line with the TCFD recommendations.
	The new powers will enable regulations to be made requiring trustees or managers of occupational pension schemes to undertake specified governance-related activities and to publish information relating to the effects of climate change on the scheme. Such regulations may require that trustees or managers take into account the different ways in which the climate might change and the steps that might be taken as a result, including with regard to climate change goals such as the goal in Article 2(1)(a) of the Paris Agreement 9 of holding the increase in the average global temperature to well below 20C above pre-industrial levels. The inserted provisions will also enable regulations to be made providing the Pensions Regulator with streamlined enforcement powers to address compliance issues.
	The long-term objective is to protect members’ benefits against the physical risks of climate change and ensure that scheme trustees and managers are properly taking into account the risks and opportunities associated with the transition to a lower-carbon economy.
	The new powers will be subject to the consultation requirements in section 120 of the Pensions Act 1995.
	Schedule 11, paragraph 12 of the Act makes equivalent provision for Northern Ireland to that made for Great Britain by section 124, by inserting new articles into the Pensions (Northern Ireland) Order 1995. 10