Recommendations & Conclusions
9 items
1
Recommendation
Fourth Report - Pension stewardship and…
Accepted
COP26, which will take place in Glasgow in November, may well be the largest summit ever hosted in the UK and it provides a major opportunity for the UK to show global leadership. We recommend that the UK Government should use this opportunity to make every endeavour to build an …
Read more
COP26, which will take place in Glasgow in November, may well be the largest summit ever hosted in the UK and it provides a major opportunity for the UK to show global leadership. We recommend that the UK Government should use this opportunity to make every endeavour to build an international consensus on the role of pension schemes and other parts of the finance sector in achieving the goals of the Paris Agreement.
Show less
Government response AI summary
The government states it is already working to build international consensus and highlights existing actions, including new regulations mandating climate-related disclosures for occupational pension schemes, a launched consultation on Paris Agreement alignment metrics, and the proposed Sustainability Disclosure Requirements regime.
Read full response →
Department for Work and Pensions
3
Recommendation
Fourth Report - Pension stewardship and…
Accepted
Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and the associated costs of meeting different reporting requirements. It would also improve the comparability of different assets across international borders. COP26 provides a significant opportunity for the Government to secure international commitments to work towards …
Read more
Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and the associated costs of meeting different reporting requirements. It would also improve the comparability of different assets across international borders. COP26 provides a significant opportunity for the Government to secure international commitments to work towards the global harmonisation of climate-related disclosures. However, work towards global harmonisation of climate-related reporting standards must not be a barrier to the UK implementing its own high standards at pace. We recommend that the Government aims to secure international commitments to work towards the global harmonisation of climate-related reporting standards at COP26.
Show less
Government response AI summary
The government states that work on consistent international climate reporting standards is underway, highlighting its proactive efforts with other countries and its support for the establishment of the ISSB, which it committed to launching at COP26.
Read full response →
Department for Work and Pensions
4
Recommendation
Fourth Report - Pension stewardship and…
Accepted
We welcome the Government’s decision to include provisions in the Pension Schemes Act 2021 to require pension scheme trustees to fully consider and disclose their climate-related financial risks and opportunities in line with recommendations by the Task Force on Climate-Related Financial Disclosures (TCFD). We recommend that, as the first economy …
Read more
We welcome the Government’s decision to include provisions in the Pension Schemes Act 2021 to require pension scheme trustees to fully consider and disclose their climate-related financial risks and opportunities in line with recommendations by the Task Force on Climate-Related Financial Disclosures (TCFD). We recommend that, as the first economy to mandate TCFD reporting for its pension sector, the UK should play an active role in encouraging and facilitating other economies to do the same. The Government should write to the Committee setting out its plans to engage internationally on this matter after COP26.
Show less
Government response AI summary
The government outlines its active international role in promoting climate-related disclosures like TCFD, including supporting the ISSB, securing agreement from 40 countries at COP26, and committing to implement ISSB standards, demonstrating its leadership in green finance.
Read full response →
Department for Work and Pensions
5
Recommendation
Fourth Report - Pension stewardship and…
Accepted
Trustees will need detailed and regularly updated guidelines provided by the Pensions Regulator to explain how they should consider the effects of climate change on pension scheme members. We recommend that the Pensions Regulator continuously monitor and update these guidelines.
Read more
Trustees will need detailed and regularly updated guidelines provided by the Pensions Regulator to explain how they should consider the effects of climate change on pension scheme members. We recommend that the Pensions Regulator continuously monitor and update these guidelines.
Show less
Government response AI summary
The government accepts the recommendation, stating the Pensions Regulator will ensure its climate reporting guidance adapts as requirements evolve. Additionally, the government's statutory guidance on TCFD reporting will be reviewed and updated at least every three years.
Read full response →
Department for Work and Pensions
6
Recommendation
Fourth Report - Pension stewardship and…
Accepted
A green taxonomy will be vital to the success of measures introduced by the Government to tackle climate change. It will support pension schemes, especially smaller schemes, in assessing the merits of different investments and avoiding the risk of “greenwashing”. We recommend that as far as possible the taxonomy should …
Read more
A green taxonomy will be vital to the success of measures introduced by the Government to tackle climate change. It will support pension schemes, especially smaller schemes, in assessing the merits of different investments and avoiding the risk of “greenwashing”. We recommend that as far as possible the taxonomy should align with international standards, whilst also reflecting the UK context. (Paragraph 28) 32 Pension stewardship and COP26
Show less
Government response AI summary
The government accepts the recommendation and commits to developing a UK Green Taxonomy aligned with international standards, with consultation on draft Technical Screening Criteria expected in Q1 2022 and legislation by the end of 2022. It has also established the Green Technical Advisory Group.
Read full response →
Department for Work and Pensions
8
Recommendation
Fourth Report - Pension stewardship and…
Accepted
Making green investments, particularly in infrastructure, can be complex and costly. Larger schemes are usually better placed to meet those costs and to provide the high level of scheme governance required. We welcome the intent of the Department for Work and Pensions and the Pensions Regulator in encouraging scheme consolidation. …
Read more
Making green investments, particularly in infrastructure, can be complex and costly. Larger schemes are usually better placed to meet those costs and to provide the high level of scheme governance required. We welcome the intent of the Department for Work and Pensions and the Pensions Regulator in encouraging scheme consolidation. We recommend that the Pensions Regulator report annually on the progress made to consolidate schemes within its existing research and analysis publications.
Show less
Government response AI summary
The government states that annual reporting on the progress of scheme consolidation is already available through existing public publications by The Pensions Regulator and the Pension Protection Fund.
Read full response →
Department for Work and Pensions
15
Conclusion
Fourth Report - Pension stewardship and…
Accepted
Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change.
Read more
Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change.
Show less
Government response AI summary
The government agrees with the committee's observation and outlines steps taken, including the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021, which require climate change risk assessment and disclosure for pension savings. It also launched a consultation on further reporting requirements.
Read full response →
Department for Work and Pensions
16
Recommendation
Fourth Report - Pension stewardship and…
Accepted
Pension schemes make long-term investment decisions for their members. A clear UK—and, where possible, international—climate change strategy will provide greater certainty for pension schemes to make long-term investments. We recommend that the Government set out a UK climate roadmap—including sector specific pathways for meeting the Paris Agreement goals—to provide greater …
Read more
Pension schemes make long-term investment decisions for their members. A clear UK—and, where possible, international—climate change strategy will provide greater certainty for pension schemes to make long-term investments. We recommend that the Government set out a UK climate roadmap—including sector specific pathways for meeting the Paris Agreement goals—to provide greater certainty for pension schemes and other investors, particularly for those investing in in long- term investments such as infrastructure.
Show less
Government response AI summary
The government states that its recently published Net Zero Strategy provides a cross-economy climate roadmap, including indicative sector pathways, which gives the financial industry the certainty needed to invest and addresses the committee's recommendation.
Read full response →
Department for Work and Pensions
20
Recommendation
Fourth Report - Pension stewardship and…
Accepted
Divestment is the process of selling assets already held by a pension scheme. Divestment remains a fallback strategy for pension schemes with investments in assets which are unable to reduce their contribution to climate change or where a good stewardship approach has failed. Nevertheless, widespread divestment by pension schemes is …
Read more
Divestment is the process of selling assets already held by a pension scheme. Divestment remains a fallback strategy for pension schemes with investments in assets which are unable to reduce their contribution to climate change or where a good stewardship approach has failed. Nevertheless, widespread divestment by pension schemes is unlikely to have the required impact on the real economy’s 34 Pension stewardship and COP26 contribution to climate change. Encouraging behaviour change in companies through good stewardship is more likely to be an effective approach to help the real economy transition to net zero. We welcome the Minister’s clear statement that divestment should be a last resort. We recommend that the Department set out, in response to its report, what specific steps it is taking to ensure that its policies do not incentivise divestment over good stewardship—while making clear that schemes could nevertheless consider divestment when there is no other option. (Paragraph 72) Pension stewardship and COP26 35
Show less
Government response AI summary
The government agrees and outlines specific steps taken to ensure policies do not incentivise divestment over good stewardship, including new climate change governance regulations for pension schemes, a consultation on Paris Agreement alignment metrics, and implementing recommendations from the Taskforce on Pension Scheme Voting Implementation.
Read full response →
Department for Work and Pensions