The Pensions Climate Risk Industry Group is drafting trustee guidance on climate-related issues and how they can address the risks as part of their governance processes.
The working group - set up by The Pensions Regulator in July to enhance the law on climate change disclosure - is chaired by Sackers partner Stuart O'Brien, working alongside the Department for Work and Pensions and the Department for Business, Energy and Industrial Strategy.
The guidance will cover how pension trustees can integrate, manage and report on climate risks in-line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and will build on the TCFD's framework which identifies exposure to climate-related financial risks.
Pensions and financial inclusion minister Guy Opperman said: "I'm really eager to put this guidance on a statutory footing as soon as possible to empower trustees to challenge their investment managers and ultimately the firms in whom they invest."
O'Brien added: "Pension trustees are already under a legal duty to consider factors which are financially material to their investment decision making. Managing the financial risk of climate change is no exception. However, to date, the way in which trustees might approach this has not been universally understood or acted upon.
"The role of the Pensions Climate Risk Industry Group is to provide practical and accessible guidance to help trustees of all schemes."
The industry working group now plans to consult on the draft guidance in the early part of 2020, later than initially expected according to the regulator's Green Finance Strategy, published in July, which noted it will consult on the working group's agreed guidance later this year.
The regulator is set to incorporate the key requirements into the governance code required by the Occupational Pension Schemes Regulations.
This follows a law change on 1 October which required trustees to show how they are factoring ESG issues into investment decisions, and required schemes to update or prepare their statement of investment principles to set out their policies in relation to the running of their scheme's default investments.
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