Source · Select Committees · Treasury Committee
Recommendation 14
14
Paragraph: 117
Consumers who hold defined benefits pensions have no choice as to how their assets are...
Recommendation
Consumers who hold defined benefits pensions have no choice as to how their assets are allocated. They rely upon their trustees. We note that previous attempts to get defined benefit schemes to acknowledge Environmental Social and Governance concerns have not been entirely successful. In its phased approach to implementing the regulations, the Pensions Regulator will need to consider how to reach smaller pension schemes. The draft regulations appear to exclude the smallest trust schemes. However, when their effects are aggregated, they may still have an impact on meeting the net zero target. In responding to this Report, the Government should set out how these smaller funds will be encouraged to integrate climate governance and reporting requirements.
Paragraph Reference:
117
Government Response
Acknowledged
HM Government
Acknowledged
More than 80% of pension scheme savers and more than 70% of assets are in schemes which will be subject to climate-related regulations by October 2022. The scope of requirements will be reviewed in the second half of 2023, at which point the duties may be extended. The exit of Defined Benefit (DB) schemes to buy-out and rapid consolidation in the Defined Contribution (DC) market will mean that a higher proportion of members and assets will be caught by 2023. Smaller occupational schemes are not exempt from the requirement to consider climate change. As well as their fiduciary duties under trusts law, both occupational DC and DB schemes are required to publicly report on their climate change policy via the scheme’s Statement of Investment Principles (SIP). The Pensions Regulator has committed to improving compliance with these requirements via its climate change strategy, which features an annual scheme return, enforcement mechanisms and transparency around SIPs. In March 2021 the Pensions Regulator consulted on a Governance Code. This requires all schemes with 100 or more members carry out an assessment of their risks relating to climate change, the use of resources and the environment and risks relating to the depreciation of assets as a result of regulatory change.