Asset owners should incorporate climate transition plans into mandates with their managers, according to proposals from the Transition Plan Taskforce (TPT).
The TPT was set up by the UK Treasury to ensure companies develop and publish rigorous
and robust transition plans that detail how they will adapt and decarbonise as the UK moves towards a net-zero economy by 2050.
In October it launched its best practice disclosure framework for climate transition plans.
The latest 43-page document, which is specifically aimed at asset owners, was developed in collaboration with representatives from Railpen, Merseyside Pension Fund, National Employment Savings Trust, Aviva, BT Pension Scheme and Aegon UK.
The Pensions Regulator, the London Stock Exchange Group and several not-for-profits are also represented on the working group.
TPT published its general disclosure framework last month, outlining 19 elements that contribute to a credible climate plan.
The current proposals aim to provide asset owners with relevant context for 11 of those elements, including strategy, metrics, and engagement with peers and players throughout the value chain.
Asset managers and banks have been provided with similar draft guidance.
“At a basic level, asset owners produce mandates for their portfolio in order to achieve outcomes for their beneficiaries, while asset managers help to achieve these outcomes through their expertise, investment products, and stewardship of these portfolios,” it states.
It added, “Asset owners, especially those that have a substantial portion of their assets managed externally, are reliant on their asset managers to implement and facilitate elements of their investment-related transition plan.
Therefore, incorporating climate-related considerations into an asset owner’s contractual governance and accountability mechanisms with its asset managers (including asset manager selection, appointment and monitoring and legal investment management agreements) are important ways in which asset owners can embed and accelerate the transition to a low-GHG and climate-resilient economy.”
It also encourages asset owners to engage and collaborate with asset managers, investment consultants, proxy advisers, environment, social and governance (ESG) ratings providers and other service providers in order to help it achieve its climate ambitions.
All of the TPT’s recommendations are based on the definitions and approaches developed by the International Sustainability Standards Board, whose new standards the UK Government has agreed to integrate into relevant rules.
The Financial Conduct Authority is expected to use the TPT’s guidance as the basis for updated climate disclosure requirements.
It will start by introducing the rules for listed companies, but plans to roll these out to regulated asset owners and managers in due course.
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