The Pensions Regulator (TPR) will work with industry stakeholders, advisers and professional bodies to develop and test a voluntary net zero transition plan template fit for occupational pension schemes, drawing on the work of the UK Transition Plan Taskforce (TPT).
Transition plans can help organisations, including occupational pension schemes, prepare for the government’s goal of transitioning the UK to a net zero nature-positive economy by 2050.
Developing them is a proactive step trustees can take to help their schemes manage transition risks, such as investments in fossil fuels or other high-carbon industries losing value or the impact of market volatility. They can also help trustees capitalise on the investment opportunities and promote sustainable investment.
However, there is no one transition plan template designed for and tailored to occupational pension schemes and TPR has announced it is working to create one with industry’s help through a transition plan working group.
Julian Lyne, TPR's Interim Executive Director of Market Oversight and Chair of the planned working group, said: "Sustainability initiatives should improve investment governance practices and help schemes make good long-term strategic decisions.
"That is why we plan to work with industry in advance of any legislation to make sure we deliver a transition plan template made by industry for industry and that provides high standards of stewardship and helps mitigate financially material systemic risks."
Although not currently a mandatory requirement, transition plans have the potential to catalyse change and help shape investment decisions in the interests of savers.
Raising trustee awareness of transition plans and their benefits has been an area of ongoing focus for TPR.
Mandating transition plans aligned to the Paris Agreement goal of limiting global temperature rises to 1.5C was included in the Labour Party's pre-election manifesto.
TPR said the ultimate template will be based on the framework and guidance developed by the TPT and will be presented to the Department for Work and Pensions this year.
Notes for editors
- The working group's purpose will be to develop and test a Transition Plan template suitable for trust-based occupational pension schemes, based on the framework and guidance by the UK Transition Plan Taskforce. The ultimate template will be capable of integrating climate, nature, societal factors and adaptation in a way that complements and supports the UK Sustainable Disclosure Requirement and associated Sustainable Reporting Standard. Members of the group will be appointed by the group's Chair in due course, but membership is expected to include trustees, advisers and representatives of professional bodies.
- TPR acknowledges addressing climate-related risks and promoting ESG integration requires a joined-up regulatory approach and will continue to work closely with other regulators, including the Financial Conduct Authority, Department for Work and Pensions, and HM Treasury, to ensure consistency and alignment in expectations and guidance for pension schemes.
- To further develop its capacity in understanding and managing ESG risks, TPR has joined the world’s largest sustainability initiative, the United Nations Global Compact. The compact is made up of more than 25,000 participants from over 160 countries and aims to create a sustainable and inclusive global economy by encouraging business and organisations to adopt responsible practices. Membership provides TPR with access to training, tools and resources on ESG topics so it can share emerging good practice and has the expertise to continue to support trustees in considering and mitigating climate and nature-related financial risks.
- TPR is also increasing its climate and sustainability team having already appointed, two new ESG Delivery Leads and an ESG Policy Analyst being recruited.
- TPR is the regulator of work-based pension schemes in the UK. It protects savers’ money, helps to enhance the pensions market and supports innovation in the interests of savers.
- Our statutory objectives are to:
- protect members' benefits
- reduce the risk of calls on the Pension Protection Fund
- promote, and improve understanding of, the good administration of work-based pension schemes
- maximise employer compliance with automatic enrolment duties
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator's functions under Part 3 of the Pensions Act 2004 only)
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