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Draft guidance on governance and reporting of climate-related risks and opportunities

Sections of this guidance



This guidance complements and should be used alongside the Department for Work and Pensions' (DWP) statutory guidance 'Governance and reporting of climate change risk: guidance for trustees of occupational schemes'.


You must meet the requirements of the climate regulations and follow the DWP’s statutory guidance.

To help us decide whether you have done this, we will be looking for clear evidence that you, as trustees:

  • are taking proper account of climate change when you are making decisions about your scheme, and that those advising you are helping you to do this
  • have carried out your analysis in a way that is consistent with the Taskforce on Climate-Related Disclosure (TCFD) recommendations so that savers and others can be confident in it
  • have seriously considered the risks and opportunities that climate change will bring to your scheme, in its particular circumstances
  • have decided what to do as a result of this analysis and have set a target to help you achieve that goal

Who this guidance is for

This guidance is aimed at trustees who are required to comply with the duties[1]  on governance and reporting of climate-related risks and opportunities.

In paragraphs 8 to 16 of part 1 of the DWP’s guidance, the Audience section describes who is subject to those requirements.

Trustees who are not subject to the requirements, and decision-makers at Local Government Pension Schemes, may wish to follow this guidance to improve the governance and resilience of their schemes in relation to climate change.


New requirements are proposed by the Occupational Penson Schemes (Climate Change Governance and Reporting) Regulations 2021 and the Occupational Pension Schemes (Climate Change Governance and Reporting) (Miscellaneous Provisions and Amendments) Regulations 2021.

Trustees subject to these requirements must take steps to identify, assess and manage climate-related risks and opportunities and report on what they have done. These reporting requirements align with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

How to use this guidance

This guidance describes what you need to do and report on in your annual climate change (or TCFD) report to comply with the new legislation.

You must have regard to the DWP’s statutory guidance 'Governance and reporting of climate change risk: guidance for trustees of occupational schemes' when complying with the Climate Change Regulations. This does not apply to the requirements for trustee knowledge and understanding or to report information to us in the scheme return.

Within each section, we detail:

Example steps to take

The kinds of steps we expect you to take and report on. They are not exhaustive. However, by completing steps like these, you should be able to demonstrate good governance of climate-related risks and opportunities.

What to report

In your TCFD or climate change report, you must disclose the actions you take to help you understand and address your scheme’s climate-related risks and opportunities. They are described in more detail in part 3 of the DWP guidance.

You may also include additional information in your report that you consider may be helpful to disclose.

Must and should

In this guidance, we describe activities that trustees ‘should’ do or ‘must’ do.

Should: we expect trustees to take the approach we outline in this guidance. If you take a different approach, you should concisely describe the reasons for doing so in the relevant section of your report.

Must: this is a requirement imposed by legislation. Failure to meet the requirement may lead to enforcement action.

Regulatory approach

A mandatory penalty applies in cases where the report is not published as required in legislation. Read part 4, paragraphs 1 to 20 of the DWP’s guidance.

In all other cases, where we believe the requirements have not been met, we have a range of enforcement options, including the discretion to issue a penalty notice. In considering whether to impose a penalty and the amount of any such penalty, which may be up to £5,000 for an individual and £50,000 in any other case, we will follow the approach set out in our monetary penalties policy and in the appendix on breaches of the climate change regulations.

The appendix gives examples of how we propose to approach penalties for breaches of the regulations. For example, a failure to disclose scheme resilience in different temperature scenarios would make it more difficult for a scheme member to see the implications of different temperatures for their pension savings. We may treat this more seriously than a failure to disclose a description of the role of a person who assists the trustees with scheme governance. We are likely to treat a failure to carry out the underlying governance activities – as distinct from a failure to make disclosures – as more of a breach. In each instance, we would consider the facts of the case and the impact of the failure.

We also have powers to issue:

  • a compliance notice to direct a person from taking or not taking specific steps
  • a third party notice if, in our view, the non-compliance is or was, wholly or partly, a result of an omission by a party who is not a trustee

In the event of non-compliance with compliance notices and/or third-party notices, we also have the power to issue discretionary fines.

We may also engage other powers, such as our power to provide information and assistance, where they apply, and we consider it appropriate to do so.

‘Building on existing duties’

Trustee fiduciary duties

You will already be managing financial risks to your scheme as part of your fiduciary duties. This should include consideration of any financially material risks – and opportunities – arising from climate change.

SIP / implementation statement requirements

Under existing regulations, if you are required to prepare a Statement of Investment Principles (SIP), it must include a policy on environmental considerations (including climate change) which you consider to be financially material. If you are a trustee of a scheme that provides money purchase benefits, you must describe in your implementation statement how you’ve put that policy into practice.

TPR’s code of practice

Our proposed new code of practice includes several modules that refer to climate change. This includes the requirement that governing bodies should assess climate-related risks and opportunities as part of their system of internal controls.

Other guidance you need to read

We will publish further guidance on how you (and your advisers) could consider climate-related risks and opportunities as part of your assessment of covenant. The publication date is not yet confirmed.

While we encourage you to monitor the recommendations of the TCFD as they evolve, particularly the work on metrics, targets and transition planning, the specific requirements of trustees are those detailed in the regulations named in the introduction to this guidance.

As far as you are able

The DWP’s guidance states you must carry out the following activities as far as you are able:

  • undertake scenario analysis
  • obtain scope 1, 2 and 3[2]  greenhouse gas emissions and other data relevant to your metrics
  • use that data to calculate your metrics
  • use these metrics to identify and assess climate-related risks and opportunities
  • measure the performance of your scheme against the target you set

The primary purpose of the provision to carry out activities ‘as far as you are able’ is to recognise that all the information you need to carry out these activities may not be available immediately. As the investment industry adapts to the new data capture and reporting requirements, more information should become available.

You will need to explain the steps you have taken to ensure compliance with your legal obligations, the obstacles you have encountered, and the impact those obstacles have had.

Read paragraphs 1-14 of part 2 of the DWP’s guidance for what to do when you are not able to obtain data for all your investments. This includes instances where obtaining some data would require a disproportionate amount of resource.

Ongoing and discrete requirements

The requirements on governance, strategy (excluding scenario analysis) and risk management are ongoing. The activities relating to scenario analysis, metrics and targets must be carried out at specific intervals.

Read paragraphs 15-18 of part 2 of the DWP’s guidance for more details.

Level of the assessment

The level of the assessment you must carry out around each of the four core elements for disclosure (Governance, Strategy, Risk management, Metrics and targets) depends on the type and nature of your scheme.

Read paragraphs 19-25 of part 2 of the DWP’s guidance for more details.

Trustee knowledge and understanding (TKU)

Information on climate-related risks and opportunities is evolving quickly. Make sure your knowledge and understanding relating to the identification, assessment and management of risks and opportunities relating to climate change are up to date. This will help you develop your governance of climate-related risks and opportunities as well as enabling you to understand any external advice or information.

We expect the actions you take to comply with the legislation, and the information that you report, to demonstrate that you know and understand the risks and opportunities to your scheme from climate change.

Read paragraphs 33 to 41 of part 2 of the DWP’s guidance for more details.


  • [1] As introduced by the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 and the Occupational Pension Schemes (Climate Change and Reporting) (Miscellaneous Provisions and Amendments) Regulations 2021 (the 'Climate Change Regulations')
  • [2] Trustees are not required to obtain Scope 3 greenhouse gas emissions in the first scheme year in which they are subject to the requirements.