The UK’s pensions regulator (TPR) has said it is keeping “very close tabs” on the work of the Taskforce for Nature-related Financial Disclosures (TNFD) as it looks at the future of sustainability reporting.
Mark Hill, climate and sustainability lead at the regulator, said that, while the current focus was on climate risk identification and management via TCFD reporting, with the UK government’s commitment to adopt its own sustainability disclosure standards “we will see that widening to embrace the wider aspects of sustainability”. He noted biodiversity, social value and concerns over slave and child labour as examples.
TPR itself will focus on how to evolve reporting requirements and support the industry “in terms of what it needs to enable the appropriate disclosure and [its] ability to act”, Hill said. “I can see data being a common theme for that to move forward. Particularly if we’re starting to look at things like biodiversity loss and how you reverse that.”
It would be useful to widen disclosures beyond climate and carbon, he added. “There are other intrinsically linked aspects to this … The challenge that schemes are going to have [is] making sure that their investments, while addressing climate change and decarbonisation, don’t have unintended consequences like deforestation somewhere along the line.”
TPR is “very much keeping an eye on where the conversation is going” around reporting, Hill said. He pointed to the development of the TNFD – a biodiversity equivalent to the TCFD – as an example of where the regulator is focusing its attention.
UK environment minister Zac Goldsmith said in late June he hoped the UK could become the first country to mandate TNFD disclosures. “I’m absolutely convinced it will be [government policy] at some point soon,” he said.
TPR is currently assessing the first wave of 23 mandatory TCFD reports from the UK’s largest pension schemes.
The new reporting requirement has prompted pushback from within the sector, with managers highlighting concerns about the availability and quality of data, as well as the burden in terms of time and resources.
Hill was keen to emphasise that TPR is aware of these concerns and does not plan to take a tough regulatory approach to the reports.
As part of its feedback, TPR will issue guidance on what Hill called “the good practice and the better practice”. He said he was reluctant to call anything best practice “because where we are we’ve only just started… it will be better practice and it will evolve, it will change, it will improve year on year”.