Pension scheme TCFD compliance ‘in jeopardy’ from poor private manager data

Half of private managers ignored Hymans Robertson's requests for climate data availability, with private debt a particular dark spot.

Private markets managers are putting pension fund compliance with mandatory Task Force of Climate-Related Financial Disclosure (TCFD) reporting regulations “in jeopardy” because of the poor availability of climate data, according to research by Hymans Robertson.

The UK-based pensions consultancy asked 59 managers, managing 137 funds across private asset classes, for information on what climate data was available on their investments. Just under half of the managers did not respond to Hymans Robertson’s questions, which it described as “a particular disappointment” and “a poor signal” to managers’ clients.

The response rate was particularly bad for private debt investors, where only four of 20 managers responded to enquiries. None of the four who did reply had any emissions data for their funds, although some respondents noted that they were themselves reliant on reporting from portfolio companies, many of which are not reporting on climate metrics.

While private equity managers were more responsive than their debt counterparts, availability of emissions data was still low. Just 9 percent of funds provided emissions data, and managers were unable to provide information on the transition plans of underlying companies. Only one of the managers had carried out any climate change engagement over the past 12 months. However, Hymans Robertson did say it was “unsurprising” that private equity data was patchy, as funds closer to maturity may not be giving priority to climate risk.

Real asset managers were more responsive and had greater availability of data. Eleven of 14 infrastructure and 15 of 25 real estate managers replied to the survey. Emissions data was available for just under half of funds in each asset class.

The survey covered managers used by Hymans Robertson’s pension fund clients.

While Hymans Robertson acknowledged that requests for climate data were a relative novelty and managers still need to develop collection processes, it noted that progress is expected to be slow and improvements are drastically needed.

The lack of private market data has “significant implications” for the ability of pension schemes to meet their reporting obligations under mandatory requirements brought in by the UK government last year, the consultancy said. Pension funds with more than £5 billion (€5.9 billion; $6 billion) in assets have already been required to produce a TCFD report, with the threshold dropping to £1 billion this October.

In a note put out in June, the UK’s Pensions Regulator, responsible for assessing compliance with the regulations, said it was aware that trustees had faced challenges relating to the availability, quality and consistency of data, and that it would be “mindful” of challenges and concerns faced by trustees when reviewing reports.

Schemes have previously complained about the availability of climate data in private markets. The £37 billion railways pension scheme Railpen said in May that it planned to step up its engagement with private managers. Chandra Gopinathan, senior investment manager at the fund, said that in private markets “you don’t even have regular data, let alone emissions data”. He suggested Railpen would look to further integrate climate and net-zero considerations into its mandates to help solve the problem.