Funds in the UK’s local government pension scheme (LGPS) have made significant progress in the presentation of climate risks, but the Scheme Advisory Board (SAB) should carry out further work in this area ahead of the 2025 fund valuations, according to the Government Actuary’s Department (GAD).
The recommendation is one of three issued by the GAD following an analysis of the 2022 actuarial valuations of the 87 funds in the LGPS.
It examined whether the fund valuations have achieved the following aims: compliance; consistency; solvency; and long-term cost efficiency.
Actuary Aidan Smith said: “Overall our analysis found the LGPS is in a strong financial position, and we examined each of the required areas in detail.
“We are committed to preparing a […] report that makes practical recommendations to advance the aims listed in legislation. We are grateful to the funds and their actuaries, and other stakeholders, for their assistance with this review.”
The SAB has said the recommendations made by the GAD “are being considered”.
In the findings, GAD recognised the “significant” progress made by funds and actuarial advisors in the presentation of climate risk analysis as part of the actuarial valuation process.
However, it also recommended the SAB consider “continuing work to refine the climate change principles document” in advance of the 2025 fund valuations.
“We strongly promote the further development of climate risk analysis and its integration into decision-making by funds,” the GAD wrote in its report.
“This remains a rapidly evolving area and we recommend that the SAB considers with other stakeholders what common principles should be adopted for the 2025 fund valuations to facilitate consistency in climate risk analysis across the scheme.”
The government has consulted on introducing rules on climate reporting for LGPS in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) but has yet to publish its response.
As part of the 2022 valuation reporting for the LGPS in England and Wales, however, the GAD required actuaries to consider climate risk, with principles agreed between actuarial firms, the government ministry, and GAD.
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