Pensions: New Task Force on Climate-related Financial Disclosures (TCFD)
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Jo Gregory 
24 January 2022 16:55
In recent times there has been an increased focus on climate change. In particular, how certain businesses and other entities are tackling this issue.
Pension schemes are no exception. There have been recent legislative changes which have placed more obligations on trustees of certain occupational pension schemes to consider environmental factors, including climate change, when setting their investment strategies.
The new regulations also impose associated reporting and publication requirements on trustees. In particular the requirement to produce a Task Force on Climate-related Financial Disclosures (TCFD) report. This is to be published on a publicly available website. And a link to which must be referred to in the scheme’s Annual Report and Financial Statements.
These new regulations came into force on 1 October 2021.
Which schemes are affected?
Schemes with net assets, excluding bulk and individual annuity policies, of £5bn or more (except in the case of earmarked schemes) on the first scheme year-end date which falls on or after 1 March 2020 are required to prepare a report.
This should be in respect of the period from 1 October 2021 to the end of that scheme year. (Unless audited accounts have not been obtained in respect of that scheme year, in which case from the date they are obtained)
Trustees must also publish a TCFD report within seven months of the end of the scheme year which is underway on 1 October 2021. (Unless scheme relevant assets are zero on the scheme year-end date)
From 1 October 2021, schemes that are an authorised master trust or a collective money purchase scheme, are also required to prepare a report. This must be for the current scheme year which is underway to the end of that scheme year. And they produce a TCFD report within seven months of the end of that scheme year.
In addition, these new regulations will apply on or after 1 October 2022 for schemes with assets of £1bn or more.
All schemes are able to adopt the new requirements on a voluntary basis.
Audit implications of TCFD
Currently, there is no requirement for the TCFD report itself to be audited.
However, on the basis the TCFD report is referred to within the Annual Report and Financial Statements, auditors would need read this report to identify any material inconsistencies with the audited Financial Statements and knowledge of the scheme in order to fulfil their responsibilities under ISA (UK) 720.
Future plans
There are plans to expand the new requirements to cover smaller schemes (assets less than £1bn assets). A review of the requirements for smaller schemes is planned to take place in the second half of 2023.
Further guidance on TCFD
The Gov.UK website contains a quick start guide for trustees which outlines the TCFD requirements and trustee’s legal duties.
PRAG has also recently released Guidance for its members, prepared by the ESG Working Party. This covers the TCFD governance and reporting requirements.
How Mercia can help
Our Accounting and Auditing of Pension Schemes course will cover these changes in detail. As well as covering up to date accounting and financial reporting regimes.
