The Pensions Regulator urged to address financial risks associated with climate change

In the coming months, the government has asked that The Pensions Regulator (TPR) set out a strategy to deal with the financial risks associated with climate change. 

In an open letter to Charles Counsell, chief executive at TPR, Pete Searle, director of private pensions and arm’s length bodies partnership at the Department of Work and Pensions (DWP) stated that TPR has an important role to play in helping pension funds deal with material financial risks arising from climate change.

The letter follows on from the UK government’s Green Finance Strategy, released in July 2019, and further sets out the department’s views on integrating climate change risks into TPR’s strategy. 

In the letter, published on 19 February 2020, the DWP recognised the actions already taken by TPR, including its involvement in the Pensions Climate Risk Industry Group, which has made progress in developing guidance for pension funds on how to address climate-related risks. 

The DWP recommended that TPR now look to outline a strategy for addressing the following points: financial risks and opportunities from climate change that impact TPR and trust-based occupational pension schemes; managing the financial risks and opportunities associated with climate change; TPR’s policy and regulatory approach to adapting to climate change.

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Searle said: “There is a need to consider the impact of climate change in the context of integrated risk management: trustees must consider the strength of the employer covenant in the face of climate change and set their own strategy accordingly.

“This includes promoting trustee understanding of the material financial risks posed by climate change, as well as opportunities that may arise.”