Nearly 1 in 5 (17%) pensions scheme trustees feel unprepared for new reporting standards from the Task Force on Climate-Related Financial Disclosures (TCFD) ahead of the initial 1st October 2022 deadline for £1billion+ schemes.
A survey from independent pensions consultancy LCP found that 60% of trustees felt that they were on track with making the necessary preparations ahead of the first looming deadline. Just 4% reported feeling ahead of the game.
By 1st October, trustees must have a system of climate governance in place. Managers also need to start identifying and collecting the right metrics ahead of the scheme end on 31st March 2023 and before the full report is submitted on 31st October 2023.
When preparing for the TCFD reporting process, LCP has highlighted five key factors for trustees to consider based on their experience working with the first wave of schemes
- Establish roles and responsibilities: While in many cases trustee boards will retain decision making power on climate risks, it is important to put in place a sub-committee or working group that can help to drive progress on data collection and target setting.
- Plan ahead & understand deadlines: we think there has been some misunderstanding of which deadline apply to different areas so this is essential to understand as well as know how many meetings you have before key deadlines to progress the necessary work. We recommend getting agenda time during at least 3 meetings and not leaving it all to the end
- Training: we are finding that early training is essential for all working groups and decision making groups due to the new and potentially unfamiliar nature of a lot of the data and work involved here.
- Find an adviser to help identify agendas and deadlines: Get an in-house resource or adviser to provide a clear project plan that plot key points between the larger deadlines, including regular project management updates to help to keep everyone on track. Training should also be a key consideration so that everyone can be brought along on the journey.
- Get started early on metrics & data: TCFD is clear on the data that is required but there still needs to be a crucial period of understating and engagement with managers upfront so that data can be provided as early on as possible.
Dan Mikulskis, Partner in LCP’s Investment team, says: “While it can be tempting to dive straight into the data, establishing the right governance structures is the most important first step in the TCFD process. Trustees must take a step back and ensure roles and responsibilities are clear from the outstart. Climate risks also need to be integrated into existing risk frameworks so that they can be managed and measured effectively.
“October can seem like a distant deadline but in fact, it only allows for one or two meetings to take place. To keep on track, it is important to get an advisor on board to help manage the reporting process and set interim targets to ensure deadlines are met. Furthermore, it is critical to understand the metrics required early on, as TCFD often acts as checklist so that can help firms understand and put the right practices in place ahead of the reporting deadline in October 2023 and beyond.”