The UK was the first G7 country to legislate for net zero and it will be the first to legislate for the Task Force on Climate-related Financial Disclosures—ensuring we tackle climate change and deliver safer, better and greener pensions.
Today I have laid the draft Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021. These regulations are world-leading and will embed the recommendations of the Task Force on Climate-related Financial Disclosures into UK law.
Climate change is an existential challenge to our environment, but not only that: it poses a systematic financial risk and threat to the long-term sustainability of UK pensions. With almost £2 trillion in assets under management, all occupational pension schemes are exposed to climate-related risks—which could have a detrimental impact on their members’ future retirement income. Pushing forward our drive for greener pensions, I consulted on detailed requirements to allow more effective governance of climate risks and disclosure in line with the Task Force on Climate-related Financial Disclosures’ recommendations in August last year. Further consultation on draft regulations took place earlier this year. We have worked directly with industry throughout this process, recognising widespread acceptance across the sector for the principle of more effective action on climate risk. The Government laid the legislative groundwork for these regulations in the Pension Schemes Act 2021.
These regulations will deliver world-leading change to the pensions industry, ensuring trustees identify, assess and manage climate-related risks and opportunities relevant to their pension scheme. As a result of our work, the vast majority of pension schemes members’ savings will be invested in schemes whose trustees have a specific legal duty to actively consider the risks and opportunities a transition to a low carbon economy brings.
I have taken the decision not to include a review clause in the regulations, invoking section 28(2)(b) of the Small Business, Enterprise and Employment Act 2015. I recognise the importance of monitoring and evaluating the initial impact of our regulations, which is why I have committed publicly in our consultation response to undertake a review in 2023. This will cover all the aspects normally required by a statutory review clause.