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The importance of the UK Transition Plan Taskforce for pension scheme trustees
The importance of the UK Transition Plan Taskforce for pension scheme trustees
4 November 2024
Series
Blogs
4 November 2024
The UK Pensions Regulator recently published a blog post emphasising the importance for trustees of improving their understanding of environmental, social and governance (ESG) considerations by reviewing the latest developments in transition planning and reporting.
The Regulator has urged trustees to familiarise themselves with the recommendations of the UK Transition Plan Taskforce (TPT), along with the Taskforce for Nature-related Financial Disclosures (TNFD) and the Taskforce for Social Factors (TSF). Whilst at this stage, there is no legal requirement to implement those recommendations, transition planning is a developing area which is likely to become increasingly relevant for trustees. The UK government has indicated it intends to make transition plans mandatory for UK-regulated financial institutions (including pension funds) and corporates, although we are still waiting for a consultation on this.
Background
Trustees may already be familiar with the TNFD and TSF. The Department for Work and Pensions (DWP) launched the TSF last year, which called for trustees to set objectives for their consultants in relation to how they approach social factors and consider asset managers' performance in relation to the same when considering mandates. Further, following the establishment of the TNFD, which aims to improve reporting on nature-related risks, many organisations around the world have committed to making nature-related disclosures based on the taskforce’s recommendations (see here and here).
However, the TPT is a significant new development in the ESG arena which has established a "gold standard" for climate transition planning. Below, we cover what the TPT is and its recommendations, why it is important and the key actions trustees should consider taking.
What is the TPT?
The TPT was launched by HM Treasury in March 2022 to develop a framework for climate transition plan disclosures for corporates and the financial sector to follow. A climate transition plan is an action plan that clearly outlines how an organisation will transform existing assets, operations and business models to transition towards achieving net zero by 2050.
The aim of the taskforce was to develop best practice for credible and robust transition plans as part of annual reporting on business strategy.
In terms of key developments:
Why trustees should familiarise themselves with the TPT framework
Actions for trustees to consider
Trustees may wish to become "early adopters" of the TPT by considering the following actions:
What's next?
ESG issues are likely to continue to pose a significant challenge for trustees and will likely climb higher up on trustees’ agendas, in particular when transition plans become mandatory in due course. Familiarisation with the TPT's framework, and integrating its guidance into governance practices, will position schemes to better navigate the transition to a low-carbon economy. Acting now will ensure that trustees are ahead of regulatory requirements and contribute meaningfully to the collective effort towards climate sustainability.
For more information on transition plans, see our transition planning and transition finance materials here.