Fourth Report - Pension stewardship and COP26
Select Committee
Work and Pensions Committee
HC 238
30 September 2021
Government response
Sixth Special Report - Pension stewardship and COP26: Government Response to the Committee’s Fourth Report of Session 2021–22 · published 17 Dec 2021
Recommendations & Conclusions
9 results
1
Recommendation
Accepted
Para 7
COP26, which will take place in Glasgow in November, may well be the largest summit...
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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3
Recommendation
Accepted
Para 17
Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and...
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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4
Recommendation
Accepted
Para 18
We welcome the Government’s decision to include provisions in the Pension Schemes Act 2021 to...
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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5
Recommendation
Accepted
Para 19
Trustees will need detailed and regularly updated guidelines provided by the Pensions Regulator to explain...
Recommendation
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.
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Government Response 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.
Department for Work and Pensions
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6
Recommendation
Accepted
A green taxonomy will be vital to the success of measures introduced by the Government...
Recommendation
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”. …
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Government Response 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.
Department for Work and Pensions
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8
Recommendation
Accepted
Para 34
Making green investments, particularly in infrastructure, can be complex and costly.
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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15
Conclusion
Accepted
Para 57
Pension schemes may already be exposed to brown asset bubbles.
Conclusion
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.
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Government Response 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.
Department for Work and Pensions
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16
Recommendation
Accepted
Para 58
Pension schemes make long-term investment decisions for their members.
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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20
Recommendation
Accepted
Divestment is the process of selling assets already held by a pension scheme.
Recommendation
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 …
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Government Response 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.
Department for Work and Pensions
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