PART 1Climate change governance etc. requirements
Governance
1. Trustees must establish and maintain oversight of the climate-related risks and opportunities which are relevant to the scheme.
2. Trustees must establish and maintain processes for the purpose of satisfying themselves that—
(a)any person who undertakes scheme governance activities otherwise than as a trustee, takes adequate steps to identify, assess and manage any climate-related risks and opportunities which are relevant to the governance activities they are undertaking; and
(b)any person who is not a legal adviser of the trustees and who advises or assists the trustees with respect to scheme governance activities, takes adequate steps to identify and assess any climate-related risks and opportunities which are relevant to the matters in respect of which they are advising or assisting.
Strategy
3. Trustees must, on an ongoing basis, identify climate-related risks and opportunities which they consider will have an effect over the short term, medium term and long term on the scheme’s investment strategy and where the scheme has a funding strategy, the funding strategy.
4. For the purpose of paragraph 3, the time periods which comprise the short term, medium term and long term are such time periods as the trustees determine are appropriate taking into account the scheme’s liabilities and its obligations to pay benefits.
5. Trustees must, on an ongoing basis, assess the impact of the climate-related risks and opportunities which they have identified on the scheme’s investment strategy and where the scheme has a funding strategy, the funding strategy.
6. Trustees must, as far as they are able, undertake scenario analysis which considers the matters in paragraph 7 in at least two scenarios where there is an increase in the global average temperature and in one of those scenarios the global average temperature increase selected by the trustees must be within the range of 1.5 degrees Celsius above pre-industrial levels to and including 2 degrees Celsius above pre-industrial levels.
7. For the purposes of paragraph 6, the matters are—
(a)the potential impact on the scheme’s assets and liabilities of the effects of the global average increase in temperature and of any steps which might be taken (by governments or otherwise) because of the increase in temperature in these scenarios;
(b)the resilience of the scheme’s investment strategy in these scenarios; and
(c)where the scheme has a funding strategy, the resilience of the funding strategy in these scenarios.
8. The scenario analysis required by paragraph 6 must be undertaken—
(a)in the first scheme year in respect of which the requirements of this Part apply to the trustees; and
(b)thereafter in accordance with paragraph 11.
9. For the purposes of paragraph 8(a), trustees may rely on scenario analysis undertaken on any day, or days, in the first scheme year in respect of which the requirements of this Part apply, including any day before the requirements apply.
10. Trustees must, in each scheme year except the first scheme year in respect of which the requirements of this Part apply, review the most recent scenario analysis they have undertaken and determine whether it is appropriate to undertake new scenario analysis to ensure they have an up to date understanding of the matters set out in paragraph 7 in at least two scenarios as set out in paragraph 6.
11. Where—
(a)the trustees have determined in accordance with paragraph 10 that it is appropriate to undertake new scenario analysis; or
(b)the trustees have not undertaken scenario analysis in the two previous scheme years,
the trustees must undertake new scenario analysis which meets the requirements specified in paragraphs 6 and 7.
Risk management
12. Trustees must establish and maintain processes for the purpose of enabling them to identify and assess climate-related risks which are relevant to the scheme.
13. Trustees must establish and maintain processes for the purpose of enabling them to manage effectively climate-related risks which are relevant to the scheme.
14. Trustees must ensure that the processes required by paragraphs 12 and 13 are integrated into their overall risk management of the scheme.
Metrics and targets
15. Trustees must in the first scheme year in respect of which the requirements of this Part apply and, where applicable, in a first scheme year of re-application, select a minimum of—
(a)one absolute emissions metric;
(b)one emissions intensity metric; and
(c)one additional climate change metric,
to calculate in relation to the scheme’s assets.
16. Trustees must from time to time, as appropriate to the scheme, review metrics which they have selected in accordance with paragraph 15 or 17.
17. Where, following a review in accordance with paragraph 16, the trustees determine that it is appropriate to replace one of their selected metrics, they must select a replacement metric of the same type to calculate in relation to the scheme’s assets.
18. Subject to paragraph 19, trustees must in each scheme year, as far as they are able—
(a)obtain the scope 1, scope 2 and scope 3 greenhouse gas emissions attributable to the scheme’s assets;
(b)use the data obtained to calculate their selected absolute emissions metric and selected emissions intensity metric; and
(c)use the metrics they have calculated to identify and assess the climate-related risks and opportunities which are relevant to the scheme.
19. In the first scheme year in respect of which the requirements of this Part apply, the trustees are not required to obtain the scope 3 greenhouse gas emissions attributable to the scheme’s assets.
20. Trustees must in each scheme year, as far as they are able—
(a)obtain the data required to calculate their selected additional climate change metric;
(b)use the data obtained to calculate that metric in relation to the scheme’s assets; and
(c)use the metric they have calculated to identify and assess the climate-related risks and opportunities which are relevant to the scheme.
21. For the purposes of paragraphs 18 and 20 trustees may, in the first scheme year in respect of which the requirements of this Part apply, rely on data obtained, calculations performed, and identification and assessment of climate-related risks and opportunities undertaken on any day, or days, in that first scheme year, including any day before the requirements apply.
22. Trustees must in the first scheme year in respect of which the requirements of this Part apply, and, where applicable, in a first scheme year of re-application, set a target for the scheme in relation to one of the metrics which they have selected to calculate.
23. Trustees must in each scheme year, including the first scheme year in respect of which the requirements of this Part apply and, where applicable, in a first scheme year of re-application—
(a)measure, as far as they are able, the performance of the scheme against the target they have set in accordance with paragraph 22 or 24; and
(b)taking into account that performance, determine whether the target should be retained or replaced.
24. Where trustees have determined in accordance with paragraph 23(b) that a target should be replaced, they must set a new target for the scheme in relation to one of the metrics which they have selected to calculate.
General and interpretation
25. Where this Part provides that trustees must meet a requirement “as far as they are able”, the trustees are required to take all such steps as are reasonable and proportionate in the particular circumstances taking into account—
(a)the costs, or likely costs, which will be incurred by the scheme; and
(b)the time required to be spent by the trustees, or any person to whom the trustees have delegated responsibility,
in taking such steps.
26. In this Part—
“absolute emissions metric” means a metric which gives the total greenhouse gas emissions attributable to the scheme’s assets;
“additional climate change metric” means a metric relating to climate change which is not an absolute emissions metric or an emissions intensity metric;
“emissions intensity metric” means a metric which gives the total greenhouse gas emissions attributable to the scheme’s assets per unit of currency;
“emissions” in relation to a greenhouse gas has the meaning given by section 97 of the Climate Change Act 2008(1);
“first scheme year of re-application” means the first scheme year in respect of which the requirements of this Part are re-applied to the trustees in accordance with regulation 3(4), 4(4) or 5(4) and where this occurs more than once, it means the first scheme year in respect of which the requirements are re-applied to the trustees on each of those occasions;
“greenhouse gas” has the meaning given by section 92 of the Climate Change Act 2008;
“scheme year” has the meaning given by regulation 2;
“scope 1” in relation to greenhouse gas emissions means all direct emissions from the activities of an entity or activities under its control;
“scope 2” in relation to greenhouse gas emissions means indirect emissions from electricity purchased and used by an entity which are created during the production of energy which the entity uses;
“scope 3” in relation to greenhouse gas emissions means all indirect emissions from activities of the entity, other than scope 2 emissions, which occur from sources that the entity does not directly control.