Welcome to the final part of our guide to the experiences of schemes that published Task Force on Climate-Related Financial Disclosures (TCFD) reports in 2022.

In part one, Governance is king, we outlined some of the key findings from TPR's review, along with more detail on the governance aspects of the reports.

In part two, The risky business of scenario analysis, we dove into the reports' often-complex strategy, scenario analysis and risk management sections.

In part three, we will discuss the metrics and targets section of the reports before concluding and setting out what we think schemes of all sizes should do next.

Metrics and targets

The requirements for this part of the report stated that schemes must choose three climate metrics (although this has since been increased to four). Popular metrics included measures of the scheme's carbon emissions, carbon footprint and data quality related to climate impact and risk for different types of emissions. It was interesting to see TPR's analysis of the metrics that schemes chose to use, which showed that data quality metrics were very popular, along with a metric on how well aligned their investment portfolio was to reducing emissions.

However, there is certainly some low-hanging fruit to improve this area of the reports and make them easier to interpret. For example, TPR noted that the proportion of the assets these metrics covered, or what asset classes, was often missing, making it difficult to understand whether the data gaps were material to the scheme or not.

As for the climate metrics, many trustee boards chose to adopt similar targets as part of writing their first TCFD report, with many choosing to target improved data quality or emissions reductions from their portfolios. TPR noted that it would be helpful if trustees set out what actions they are taking to achieve their targets. It will be interesting to see how the metrics improve over time and whether schemes can meet the targets they've set out to achieve.

TPR's analysis found that many schemes had formal targets to achieve net-zero carbon emissions from their portfolios and/or operations, which is great news, especially because TPR estimated that these targets were in respect of over £450bn of assets and over 18m scheme members.

Our view: These net-zero targets should, so long as they are followed up with interim targets, concrete action plans and strong environmental policies, represent a significant contribution to the transition to a low-carbon economy. They demonstrate that trustees understand the systemic nature of climate change.


This first round of TCFD reports by the country's largest schemes offers an encouraging start and we expect them to become more useful and consistent documents in the coming years. TPR notes that they'll take a more rigid stance on non-compliance and will issue fines to schemes that aren't making reasonable attempts to comply, illustrating their importance.

We believe that there is more trustees can do to translate what could be seen as a compliance and reporting activity to one that adds value to ensure risks and opportunities are appropriately managed and members' best interests are looked after.

Next steps

Like trustee boards, we have learnt plenty through supporting schemes with preparing their first TCFD reports and are excited to be helping those schemes develop these further, as well as assisting schemes in the second wave (those with assets of over £1bn). TPR's review of the reports published to date was very helpful and we think further guidance on employer covenant issues will be particularly useful for schemes.

Our three top tips for schemes preparing TCFD reports are:

  1. Be clear on how the scheme's governance structure makes it well-placed to seize opportunities related to climate-related risks
  2. Ensure that sufficient time is spent considering the possible impact on the employer covenant, and that any analysis on this can be easily combined with an analysis of the scheme's assets and liabilities
  3. Provide evidence of the actions taken to improve metrics and targets related to emissions

Smaller schemes, not currently in scope of TCFD reporting, can also benefit from considering climate change and the learnings of the largest schemes by:

  1. Undertaking scenario analysis of the impact of climate-related risks on the scheme's funding and investment strategy and considering what actions this analysis suggests
  2. Ensuring that climate-related risks are captured as part of the scheme's standard risk management processes and are being considered as part of day-to-day decision-making

Trustees should not forget that there are a couple of tweaks to the requirements for the second TCFD reports published: so-called "scope 3" emissions now need to be included in the reporting of carbon emissions and intensity measures (if they were not previously). A new portfolio alignment metric also needs to be reported on.

Trustees who are well-versed in climate change and climate-related risks are best placed to draw value from the TCFD reporting requirements. To this end, we offer a multi-session training course for trustees covering the background of climate change, the risks and opportunities for pension schemes and how they may develop in the future. Schemes that draw up a Climate Action Plan, to record the various risks and opportunities they've identified, along with tangible actions they are taking to ensure their members' best interests are being looked after, will be best placed to make a difference.

Climate change is widely recognised as a systemic risk of unprecedented scale and severity. Actions to address it are a collective priority, given the risks it presents to individual pension schemes, the ongoing resilience of the savings universe, and the planet as a whole. Therefore, we encourage all trustee boards to ensure it is integrated into their agendas in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.