

The UK pensions regulator (TPR) has found “areas for improvement” in its review of the first wave of TCFD reports by the country’s largest pension funds and has promised to take a tougher enforcement approach where regulations have not been complied with.
Under new regulations, schemes with more than £5 billion ($6.1 billion; €5.7 billion) in assets were required to report against TCFD recommendations from October 2021, with the threshold dropping to £1 billion in October last year.
The review, which looked at reports from 45 schemes in the first wave of mandatory disclosure, described progress as encouraging in all but a small number of cases. It also said reports were generally strong at reporting on governance and targets, but noted that all categories saw some reports missing required information.
For instance, under the risk management header, TPR noted that some reports listed how climate-related risks were managed but failed to specify how they were identified or who was responsible for this, as required under the regulations.
Some of the UK’s largest schemes were heavily critical of the burden of producing TCFD reports last year, with data quality and availability cited as a major concern.
In its review, TPR acknowledged that data quality and coverage remain a challenge, especially as schemes begin reporting on Scope 3 emissions in their second year of reporting.
However, the regulator said this was expected to become less problematic over time as both disclosures and scheme experience improve. It also noted that some reports do not explain why the data that they report is incomplete.
While general progress was encouraging, TPR flagged a small number of reports where the quality of disclosures was “disappointing”, and warned that in these cases it would take a tougher enforcement approach.
TPR had previously said it would only issue fines where reports have not been published or it was clear a genuine effort to comply with regulations had not been made. However, it will now consider issuing penalties where the reports simply fail to meet the regulations, it said.
Natural development
A spokesperson for TPR told Responsible Investor that it expected trustees would also begin to look at reporting on nature-related financial risks. The TCFD’s biodiversity equivalent, the Taskforce for Nature-related Financial Disclosures (TNFD), is currently developing its own framework.
Asked whether it saw utility in schemes reporting against the TNFD framework, the TPR spokesperson said the regulator wanted to see trustees “take into account all financially material risks and opportunities that could impact savers’ pensions as part of good risk governance and stewardship”.
The framework, when developed, will be useful for trustees to integrate material nature-related risks into their decision-making and will also help trustees develop their knowledge and understanding of biodiversity and nature-related risks, the spokesperson continued.
They added that TPR would encourage trustees to engage with the taskforce’s work “sooner rather than later”.
TPR’s climate and sustainability lead told Responsible Investor last year that it was “keeping very close tabs” on the framework’s development.
Additional reporting by Gina Gambetta