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Issued: June 2021
Last updated: September 2022


Read paragraphs 184 to 196 of part 3 of the DWP’s statutory guidance and paragraphs 1 to 14 in part 2 of that guidance for more on the requirement to set at least one target in relation to a climate change metric and to measure performance against that target.

Example steps to take

Taking the following actions may help you meet your obligation to set a target.

Select an appropriate target

Select a target for at least one of your metrics. Targets should reinforce risk management, be scheme-specific, and not be chosen arbitrarily.

You may use more than one target if it is relevant to your investment strategy and the way you want to manage climate-related risks and opportunities. You could set more than one target on the same metric for different parts of your scheme portfolio or over a series of time periods, or you could set different targets on other metrics.

Example: selecting a target

The OP pension scheme has a complex investment strategy. The trustees have been advised that their climate data coverage is currently around 30% across their total scheme assets and that the techniques to effectively calculate emissions metrics for some of the assets and derivatives held are very limited.

The trustees know that they must report on at least one target for their scheme. They know that the target is not legally binding and should not hinder their fiduciary duties. The trustees decide to select one emissions target to disclose and agree to set a series of additional internal targets to help increase the extent and quality of future reporting.

The trustees want additional targets to be realistic and relevant to their evolving scheme arrangements. They discuss how they expect the scheme’s investment arrangements to develop in the short term with their advisers. Following those discussions, they understand that:

  • they expect to begin a series of buy-in transactions, with around 20% of the assets expected to transfer in the first year
  • around 15% of their total scheme assets are held in private market funds, which will mature uniformly over the first three years and need to be reinvested
  • data coverage would improve by around 10% in the first year as the regulatory requirements to disclose take effect

The trustees believe that engagement with service providers, investments held and counterparties, could play a significant role in improving data and analytical coverage. It could also help reduce the underlying climate-related risk in certain investments held.

The trustees ask their advisers to:

  • produce a table outlining the scheme’s material holdings and highlighting the data and analytical gaps they believe are most material to climate-related risks
  • overlay that table with an assessment of where engaging with data coverage might have the most material impact and also where engaging with individual investments might have the most impact on material climate-related risks

With support from their advisers, the trustees use the table to help them set a range of targets that are realistic and allow for the future development of the scheme. The trustees understand how those individual targets might be achieved and set specific objectives, including engagement objectives, around them. They set the current scheme year as their reference year.

Set a framework for delivering against your targets

Define a reference base year and a time period for meeting your targets.

You will be able to manage climate risks and opportunities more effectively with a framework that includes interim targets. If you set a long-term target of more than 10 years in the future with no interim targets, we would expect you to explain why in your report.

Engage with your service providers

As with other activities in this guidance, discuss your targets with your service providers and jointly review how your scheme’s plans fit with their terms of appointment.

Example: monitoring progress against a target

The trustees of the QR pension scheme have previously calculated a weighted average carbon intensity (WACI) metric. They monitored progress and tried to lower the carbon intensity of their investments compared to the asset class benchmark. Not all relevant data was available, so the trustees made approximations for a material part of their scheme assets. They believed that the carbon intensity of their scheme portfolios was around 30% lower than the benchmark. Having taken advice from their investment adviser, they developed their proposed decarbonisation trajectory up to 2030 for their scheme portfolios based around that starting position.

The trustees decide to disclose a WACI target in their climate report and explain their reasoning for using this metric when they report. They have recently been able to access better quality data for a material part of their investment portfolio and recalculate the metric to find that the carbon intensity is only 15% lower than the benchmark.

The trustees instruct their investment adviser to prepare a report on how they could reduce their carbon intensity by 15% by 2023 relative to the benchmark to align with their decarbonisation trajectory up to 2030.

The trustees currently hold a material amount of scheme assets in a real asset portfolio and are concerned that, due to data limitations and approximations, the carbon intensity of their scheme portfolios could be underestimated. They instruct a specialist adviser to help them understand and reduce the operational carbon and energy intensity in their real asset portfolio.

The trustees also set additional objectives:

  • to invest a percentage of their assets in renewables and clean technology by 2025
  • to identify significant concentrations of exposure to carbon-related assets in their portfolio
  • to develop a management and mitigation plan where concentrations of exposure exceed a threshold

The trustees acknowledge that the targets they set are aspirational. The targets should enable them to manage material climate-related risks but are not legally binding. They agree to implement changes only when they have received advice from their investment adviser that the changes and their implementation are appropriate and consistent with their duties under the scheme’s trust deed and rules and the investment regulations.

The trustees also agree to seek additional legal advice to ensure that any targets set, and the implementation of those targets, does not conflict with the trustees’ fiduciary duties.

What to report


Read paragraphs 193 to 196 of part 3 of the DWP’s statutory guidance for what you must describe in your report. A summary is set out below.

When reporting on the steps you have taken, you must describe:

  • the target you set in relation to at least one of the metrics you calculated
  • as far as you are able, your scheme’s performance against that target

You should also describe concisely:

  • the steps you are taking to achieve your target (or targets)
  • the method you used to measure performance against your target (or targets) and any estimates you relied upon
  • if you have replaced or missed a target, a brief explanation why
Publishing your report