How Carne can help pension schemes comply with TCFD reporting requirements

The climate crisis poses a material financial threat to global investments and millions of savers’ retirement plans. This makes TCFD reporting so much more than a “tick-box” compliance exercise. Trustees need visibility of their schemes’ overall climate related risks so they can set their net zero strategy and hold their investment managers to account. That requires accurate and timely emissions metrics at both fund and overall scheme level. 

There are broadly three ways for pension schemes to gather these climate metrics: 

1. Ask their investment managers to provide climate metrics for their funds. This is likely to require multiple emails and spreadsheets as well as manual processing. There is also likely to be a lack of consistency as each manager will use different metrics providers and methodologies. 
2. Ask their investment consultant firm to calculate the metrics using a leading ESG data provider. This solves the consistency issue but is still labour-intensive. Many consultants also don’t consider it a core skillset or an efficient use of their time, and don’t want to become data warehouses. 
3. Outsource the aggregation and calculation of climate metrics and targets to a specialist, independent third-party provider. This can be both cost effective and efficient, but the methodologies must be transparent and auditable, and the data accurate and consistent.  

TCFD is likely the first in an ever expanding set of sustainability-related directives by regulators but the Taskforce for Nature-related Financial Disclosures (TNFD) framework will require biodiversity metrics, and Sustainability Disclosure Requirements (SDR) will also impact reporting requirements. Carne is here to help investors tackle this reporting challenge and to solve the many regulatory and reporting challenges faced by asset managers, asset owners and investment consultants using our proprietary flexible technology and industry expertise.

Our online reporting technology sits at the centre of a rapidly growing financial ecosystem, streamlines data flows between managers, consultants, trustees and investors. It enables fair comparisons between funds and gives trustees a clear view of the overall emissions profile of their portfolio. It also enables consistent year-on-year comparisons so trustees and beneficiaries can see how their scheme’s commitment to tackling climate change is evolving. 

In October 2022, the DWP extended TCFD reporting to schemes with over £1bn of AuM. Smaller schemes will likely have to comply in due course (possibly as early as 2024). As already highlighted, the industry may also soon need to comply with a further five to ten ESG-related regulations and reporting frameworks.

Without scalable, efficient and cost-effective technology to enable rapid and accurate data aggregation, the pensions industry will not only struggle to meet its statutory obligations, but also its climate targets and promises. 

To find out more about how Carne can help you to meet your regulatory obligations, contact Joel Wardle or Jignasa Patel. You can also find our more by visiting our dedicated TCFD Reporting Service hub here. 

Photo by Chuttersnap on Unsplash