UK's Pensions Regulator Pushes For Further Climate Scenario Analysis

In August 2023, the UK pensions regulator's climate and sustainability lead, Mark Hill, authored an article setting out how trustees can improve the climate-scenario analyses used by their schemes, in order to make them more "decision-useful." While Hill acknowledged that the sector had made progress on its climate journey, "data and analytical gaps and imperfect models seem to present considerable challenges."

Earlier this year, The Pensions Regulator's (TPR) Executive Director raised concerns over the integrity of some climate scenarios and warned in-scope schemes that enforcement action may be taken against them for failure to comply with TPR's requirements to, among other things, publish a statement of investment principles (SIP). A scheme's SIP should set out its investment policy and include considerations of financially material ESG factors including, but not limited to, climate change.