PART 5

Further provision relating to pension schemes

Climate change risk

Climate change risk
124
1
The Pensions Act 1995 is amended as follows.
2
After section 41 insert—

Climate change risk
41A
1
Regulations may impose requirements on the trustees or managers of an occupational pension scheme of a prescribed description with a view to securing that there is effective governance of the scheme with respect to the effects of climate change.
2
The effects of climate change in relation to which provision may be made under subsection (1) include, in particular—
a
risks arising from steps taken because of climate change (whether by governments or otherwise), and
b
opportunities relating to climate change.
3
The requirements which may be imposed by the regulations include, in particular, requirements about—
a
reviewing the exposure of the scheme to risks of a prescribed description;
b
assessing the assets of the scheme in a prescribed manner;
c
determining, reviewing and (if necessary) revising a strategy for managing the scheme’s exposure to risks of a prescribed description;
d
determining, reviewing and (if necessary) revising targets relating to the scheme’s exposure to risks of a prescribed description;
e
measuring performance against such targets;
f
preparing documents containing information of a prescribed description.
4
Regulations under subsection (3)(b) may, in particular, require—
a
that assets are assessed by reference to their exposure to risks of a prescribed description, and
b
that an assessment includes determining the contribution of the assets of the scheme to climate change.
5
The regulations may require the trustees or managers of the scheme to take into account—
a
different ways in which the climate might change, and
b
different steps that might be taken because of climate change.
6
Regulations under subsection (5) may require the trustees or managers of the scheme to adopt prescribed assumptions as to future events, including assumptions about—
a
the steps that might be taken for the purpose of achieving the Paris Agreement goal or other climate change goal, or
b
the achievement of the Paris Agreement goal or other climate change goal.
7
In complying with requirements imposed by the regulations, a trustee or manager must have regard to guidance prepared from time to time by the Secretary of State.
8
In this section “the Paris Agreement goal” means the goal of holding the increase in the average global temperature to well below 2°C above pre-industrial levels referred to in Article 2(1)(a) of the agreement done at Paris on 12 December 2015.

Climate change risk: publication of information
41B
1
Regulations may require the trustees or managers of an occupational pension scheme of a prescribed description to publish information of a prescribed description relating to the effects of climate change on the scheme (which may include information about matters to which regulations under section 41A may relate).
2
Regulations under subsection (1) may, among other things—
a
require the trustees or managers to publish a document of a prescribed description;
b
require information or a document to be made available free of charge;
c
require information or a document to be provided in a form that is or by means that are prescribed or of a prescribed description.
3
In complying with requirements imposed by the regulations, a trustee or manager must have regard to guidance prepared from time to time by the Secretary of State.

Sections 41A and 41B: compliance
41C
1
Regulations may make provision with a view to ensuring compliance with a provision of regulations under section 41A or 41B.
2
The regulations may in particular—
a
provide for the Authority to issue a notice (a “compliance notice”) to a person with a view to ensuring the person’s compliance with a provision of regulations under section 41A or 41B;
b
provide for the Authority to issue a notice (a “third party compliance notice”) to a person with a view to ensuring another person’s compliance with a provision of regulations under section 41A or 41B;
c
provide for the Authority to issue a notice (a “penalty notice”) imposing a penalty on a person where the Authority are of the opinion that the person—
i
has failed to comply with a compliance notice or third party compliance notice, or
ii
has contravened a provision of regulations under section 41A or 41B;
d
provide for the making of a reference to the First-tier Tribunal or Upper Tribunal in respect of the issue of a penalty notice or the amount of a penalty;
e
confer other functions on the Authority.
3
The regulations may make provision for determining the amount, or the maximum amount, of a penalty in respect of a failure or contravention.
4
But the amount of a penalty imposed under the regulations in respect of a failure or contravention must not exceed—
a
£5,000, in the case of an individual, and
b
£50,000, in any other case.
3
In section 116 (breach of regulations), in subsection (3)(b), after “10” insert “or under provision contained in regulations made by virtue of section 41C”.
4
In section 175 (Parliamentary control of orders and regulations)—
a
in subsection (1), after “(2)” insert “, (2A)”;
b
after subsection (2) insert—
2A
A statutory instrument which contains the first regulations made by virtue of section 41A or 41C must not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.