The chair of the Local Government Pension Scheme Advisory Board believes that the government missed the opportunity to introduce new climate-related reporting rules for local authority schemes with COP26, after a request sent to the minister of state for Levelling Up Communities mysteriously failed to reach its intended recipient.
Councillor Roger Phillips wrote to Kemi Badenoch last year on behalf of the SAB, requesting that Task Force on Climate-related Financial Disclosures regulations for LGPS schemes should be brought forward for the COP26 climate conference. These rules have yet to be confirmed.
“I saw the window of opportunity of getting the TCFD requirements for local government as part of the government’s ‘great, this is what we’re doing coming up to Glasgow’. I would have thought that this was a no-brainer,” Phillips told the Pensions and Lifetime Savings Association’s local authority conference on June 14.
You can understand the appeal for consistency across this piece, because this is an incredibly difficult part of reporting to deal with, as the Department for Work and Pensions is already discovering in private pension schemes
Roger Phillips, Scheme Advisory Board
DLUHC yet to issue LGPS TCFD rules
Since October 2021, private sector schemes with more than £5bn of assets have had to comply with TCFD rules. From October this year, this scope will widen to schemes with more than £1bn in assets.
The Department for Levelling Up, Housing and Communities is responsible for issuing LGPS-specific rules to set out the TCFD regime for local authority pension funds.
“My understanding is that the civil servants, in the team there, had sent it to her,” Phillips told the conference.
“Something happened in the political processes in between, and it is a matter for conjecture elsewhere as to what happens and how government runs itself, and how it gets these policies off the starting grid.”
In a sign of potentially competing legislative priorities, the government has separately asked LGPS funds to allocate 5 per cent of their assets towards local infrastructure, a proposal that received the SAB’s support in a letter sent to Badenoch, after Phillips eventually met with the minister in April 2022.
In this letter, Phillips sought clarity on the government’s definitions and expectations for the idea, echoing these sentiments to the PLSA conference on June 14.
He appealed to Badenoch for government assistance in overcoming hurdles to infrastructure investment, including those concerning cost and scale.
Consistency needed
Phillips said that when he met Badenoch in April, he “did say how extremely disappointed we were that the TCFD regulations had not come out, because we are very anxious to ensure that we are reporting on these issues.”
“We are an extremely public pension fund. We are in the public eye, we are getting the freedom of information requests on a regular basis,” he added.
“It will be tasked to us as a SAB to make an annual report of what we are doing as funds, and as a scheme.
“You can understand the appeal for consistency across this piece, because this is an incredibly difficult part of reporting to deal with, as the Department for Work and Pensions is already discovering in private pension schemes,” Phillips continued.
“It was a great pity that it wasn’t there for COP26 in Glasgow,” he noted, citing advice that the rules will be released before COP27 in November 2022.
LGPS advisory board chair appeals for infrastructure clarity
The government needs to provide a clearer definition of the kind of infrastructure investment it wants public sector schemes to carry out as part of its levelling up agenda, the chair of the Local Government Pension Scheme advisory board has said.
“The biggest concern I have with it is how we actually get the mechanisms and that consistency of approach across all the funds,” Phillips said.
A DLUHC spokesperson said: “We are currently working on proposals for the consultation on the LGPS, which will take place later this year. The consultation will include options relating to climate change as well as other investment proposals.
"We will continue to work closely with the SAB and will always consider their proposals, but it’s important we take the time to work through proposals and get it right.”
