UK pension funds are now required to report on their climate change impact.

  • New legislation puts obligations on UK pension trustees to evaluate and report on the risks and opportunities presented by climate change.2
  • It is likely that from October 2021 UK schemes with over £5billion in relevant assets will be required to make disclosures in line with the recommendations from the Task Force on Climate-Related Financial Disclosures (“TCFD”)3 and this requirement may be expanded to smaller schemes as early as 2024.8
  • The TCFD recommendations are designed to guide organisations in providing better information on the impact of climate change to support informed capital allocation.4
  • TCFD-aligned disclosures will be mandatory across non-financial and financial sectors of the UK economy by 2025 and in New Zealand by 2023.5, 9

The impact of climate change will be felt across all aspects of society and across jurisdictions. The process of transition to a low carbon world needs to involve both individuals and governments alike. Consumer led activism has already started in the pensions industry – our recent blog on Make My Money Matter highlighted that 52% of consumers want their pensions to be part of the solution in tackling climate change. The Pensions Schemes Act 2021 (“the Act”), which achieved Royal Assent on 11 February 2021,1 is further pushing the c.£2 trillion in assets under management of UK occupational pension schemes towards considering the impact of climate change.6 The Act has also laid the foundation for a pensions dashboard to enable individuals to view their pensions online, providing greater transparency.10 The Act also includes increased Pensions Regulator powers and associated criminal offences as well as a toughening of the funding regime for defined benefit schemes.12

The Act requires trustees to ensure there is effective governance in respect of the impact of climate change as well as evaluate and report on the risks and opportunities presented by climate change.2 Guy Opperman, Minister for Pensions, said: “This Act makes our pensions safer, better and greener, as we look to build back better from the pandemic. Its passage will reassure savers that they can, and will, have a retirement they deserve.”7

Draft regulations and statutory guidance, closed for consultation on 10 March 2021, propose that schemes with relevant assets of £5 billion or more as well as all authorised master trusts and authorised collective money purchase schemes will have to produce and publish a TCFD report from October 2021.  It is anticipated that these requirements will then be extended to schemes with relevant assets of £1 billion or more from 1 October 2022. An interim review will be carried out in 2023 to determine whether the regulations will be rolled out to smaller schemes, this may be as early as 2024.8

The draft regulations require trustees to:

  • implement climate change governance measures and produce a TCFD report containing associated disclosures; and
  • publish their TCFD report on a publicly available website, accessible free of charge.3

The TCFD was set up in 2015 to deliver a set of recommendations for voluntary company financial disclosures of climate-related risks. The intention of TCFD is to facilitate an orderly transition to a low carbon economy and ensure that climate-related financial disclosures are comparable and consistent. The TCFD recommendations provide guidance on making disclosures on the opportunities and risks presented by climate change, including physical and transition risks.4

Source: TCFD website

The TCFD recommendations are structured around four thematic areas: Governance, Strategy, Risk Management and Metrics & Targets. Each theme has a few recommended items that should be included in the disclosure. For example, the Governance disclosure includes “Describe the board’s oversight of climate-related risks and opportunities.” The TCFD recommendations are intended to be used as a tool to guide organisations on making climate related disclosures rather than an exact prescriptive blueprint.4

The use of the TCFD recommendations is more widespread than the UK pension sector. In September 2020, New Zealand was the first country to announce that the TCFD will become a mandatory framework, it is expected that c.90% of New Zealand’s assets under management will be required to report using TCFD by 2023.9 On the 9th November 2020, Rishi Sunak, the UK Government’s Finance Minister announced that climate risk reporting will become mandatory for some large companies and financial institutions in the UK by 2021 and will be mandatory across the UK economy by 2025.5  The Canadian government made TCFD reporting mandatory for recipients of covid-19 support funding.11

In the run up to COP26 in Glasgow in November, the UK is making firm commitments to force UK pension funds and other organisations to consider and disclose the risks and opportunities presented by climate change.


1Pension Schemes Act 2021 – Parliamentary Bills – UK Parliament

2 Pension Schemes Act 2021 (

3 Aligning your pension scheme with the TCFD recommendations (

4 About | Task Force on Climate-Related Financial Disclosures (

5 Chancellor sets out ambition for future of UK financial services – GOV.UK (

6 Pension schemes and climate-related risks – GOV.UK (

7 Landmark moment for UK pensions as Bill receives Royal Assent – GOV.UK (

8 Taking action on climate risk: improving governance and reporting by occupational pension schemes (

9 New Zealand becomes world’s first country to introduce mandatory TCFD disclosure (

10 Passing of the Pensions Schemes Bill: the keystone of pensions dashboards | Pensions Dashboards Programme

11 TCFD adoption continues to grow (

12 The Pension Schemes Act 2021.pdf (