What the Taskforce on Climate-related Financial Disclosures (TCFD) report means for pensions communication

Few members probably see the connection between their finances and climate change. As the new requirement for pension schemes over a certain size to publish a Taskforce on Climate-related Financial Disclosures (TCFD) report comes into force, is there an opportunity to change this? Our pensions communications specialists share a few tips to communicate Environmental, Social and Governance (ESG) matters in an effective way.

With the recent heatwaves across Europe, climate change is at the forefront of everyone's mind. According to the ONS, 75% of adults in Great Britain worry about climate change. The UK Government is also introducing measures to encourage businesses to recognize and address their impact on our planet. Its work on this extends to pension schemes; the Government has stated that UK occupational pension schemes, with ~£2 trillion in combined assets, are "uniquely placed to invest in the financial opportunities that are emerging […] to drive us towards a lower carbon economy."

As a result, there's a new requirement for pension schemes over a certain size to publish a Taskforce on Climate-related Financial Disclosures (TCFD) report.

Currently, only large schemes are required to publish a report. But even if your scheme doesn't have to, it's worthwhile communicating with your members about ESG matters. Your Trustees' and investment managers' work in this space will be of interest to your members, who might feel reassured to know that their money is doing good.

What is a TCFD report?

The TCFD report is a public-facing document which must disclose what trustees are doing to understand and address the risks and opportunities that climate change can pose to their scheme. It must be made available on a public website. More detail about the report's required contents and structure is available on the TCFD website.

The Government is expected to review the position for smaller schemes in 2023.

Making the link between pensions and ESG

Whilst the TCFD report is necessary and ticks the legislative box, by its nature it's generally long, detailed and technical. It also focusses more on the scheme's governance than any impacts on individual members. We think there's a missing link here.

Your members probably think about climate change when they recycle their plastic or adhere to a hosepipe ban — but have they considered the relationship between their finances and climate change? We know that The Pensions Regulator recommends clear, jargon-free and relevant member communications, so we are advising our clients to produce a punchier communications piece to members that summarizes your TCFD report (if required), helps members understand related matters like investing responsibly, and shouts about what your scheme is doing in this space. It can point members to the full TCFD report if they want to read it.

Our carbon footprint modeller is an off-the-shelf online decision-making tool that helps members understand how their pension investment choices impact the environment.

Your campaign might also link to further resources, such as our carbon footprint modeller, an off-the-shelf online tool which can help members understand how their pension investment choices (and other lifestyle changes) can affect the tones of CO2 that are released into the atmosphere. It provides an option to see how moving their DC pot to an ESG fund can reduce their carbon footprint.

You could also consider using your campaign to:

• Remind members of any sustainable investment options the scheme has available for DC benefits;
• Encourage members to provide email addresses in an effort to reduce the scheme's use of paper for communications; or
• Provide reassurance that ESG investing and strong growth aren't mutually exclusive, and that the scheme will continue to be governed with members' best interests in mind.