TPR’s Latest Review on TCFD Reporting

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Introduction
Following the conclusion of the second year of the Task Force on Climate-related Financial Disclosures (“TCFD”) reporting requirements, the Pensions Regulator (“TPR”) has published its review which makes various observations and provides feedback on the information included in schemes' TCFD reports. TPR also suggests areas where these reports could be improved in the future. A link to this review can be found here.
The importance of climate change management is now well established, and many trustees acknowledge that it creates both risks and opportunities for pension schemes. Some examples given by TPR include “forestry, or green bonds and/or committing funds to private market renewables”.
As trustees will be aware, following the recommendations from the TCFD, the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 (the “Climate and Governance Regulations”) made climate reporting mandatory for the largest pension schemes in the UK. Whilst not all schemes are governed by the TCFD reporting requirements, nevertheless all schemes can benefit from the TPR’s report findings as they can serve as a guide or roadmap for trustees seeking to improve the climate-related management of their scheme. Trustees should take TPR's review findings into account in any climate-related decision making in relation to their pension scheme.
TPR’s Review
Building upon their review from the previous year, TPR re-examined 30 climate-related reports covering schemes with year-ends between 1 October 2022 to 30 September 2023. These reports represent approximately 10% of the total number of TCFD reports through that same period and TPR’s review specifically focused on the following four areas:
Key Findings for 2024
TPR set out their overarching observations and identified certain future considerations for trustees to take into account when preparing their reports.
Context is key. TPR concluded that it would be beneficial for schemes to contextualise their report for the reader. This could be principally achieved by providing information about the scheme that would give a frame of reference for the reader (such as scheme size or funding level).
Materiality was another important factor in the reports. TPR emphasised that by explaining the size of specific investment mandates in relation to the total scheme assets, the reader would be able to better comprehend the significance of this mandate.
TPR also provided some practical steps that trustees could take to ensure that their next TCFD report achieves maximum efficacy:
TPR also reiterated that the risks faced by each scheme are dependent on numerous factors and therefore, the more material climate-related risks faced by a scheme, the more time and resources should be spent by trustees in managing those risks.
Next Steps for Trustees
Going forward, trustees should ensure that any TCFD reports continue to meet the Climate and Governance Regulations, satisfy the DWP’s statutory guidance and also demonstrate that the trustees have taken account of the recommendations in the previous year’s TPR report.
Given the importance of climate change reporting and TPR's policing of it, trustees may wish to seek advice on compliance with the various reporting requirements. Burges Salmon can assist in advising on all aspects of ESG in relation to pension schemes and ensuring TCFD compliance. If you would like to discuss this topic further, please contact your usual Burges Salmon pensions contact or our pensions ESG expert, Kate Granville Smith.
This article was co-written by Lui Henderson, Sophie Kirk and Kate Granville Smith