Managing sponsor
climate risk and TCFD

Case studies

The background

We advise the trustee of a scheme sponsored by a financial services business. We have been appointed for a number of years and have provided valuation, monitoring and transactional services, but have seen our clients’ needs change over time as regulation has developed.

Our solution

As the scheme had more than £1bn of assets, it needs to report on its approach to managing climate related risks under Task Force for Climate-related Financial Disclosures (TCFD) requirements. 

However, although this was a catalyst for the trustee to commission us to undertake some covenant analysis in this area, we structured our advice so that it would allow the trustee to make more informed judgements about covenant risk in general when making strategic journey planning decisions.

We engaged with the sponsor’s management team to understand their governance structures and processes for managing climate risks as well as the opportunities that the climate change provided to the business. We also undertook benchmarking exercises versus peers and considered reports from external agencies.

The results

We provided a report to the trustee which provided an integrated assessment of how climate risks could impact on both the scheme and the sponsor. We did this by considering the different short-, medium- and long-term time horizons of the scheme’s journey plan and considered how the sponsor covenant was exposed to different forms of climate risk under each pathway (considering both transition and physical risks). 

This allowed us to pinpoint the scenarios where climate risk would be most likely to adversely impact the sponsor. Armed with this information, and comparing to scenarios where the schemes assets may be most impacted, we could then reassess the existing strategy and contingency plans to conclude whether they remained fit for purpose. 

Chart your own course

Chart your own course

A tale of two journeys

In this report, we address the issues that pension schemes are facing today, provide tips on how to overcome them and prioritise different steps depending on your scheme’s position.

Read the report

How we can help

We help sponsors of pension schemes understand and manage the costs and risks associated with supporting their current and legacy pension schemes as well as other employee benefits.

We help trustees understand and monitor the employer covenant.

We help pension scheme trustees and sponsors to determine the ultimate destination for their scheme and help them put together a plan to get there, including how to effectively manage the risks they face along the way.

We help trustees achieve their strategic goals, with solution-led, appropriate advice.