Taps kept running: Why it is time to replace TCFD and Implementation reports with transition plans and climate investments

UK pension funds are facing a strange contradiction. On one hand, there is a growing debate about whether pension schemes should focus on climate change, biodiversity loss, social inequality, human capital, or the next sustainability priority. Conferences are filled with discussions about what should come next. Consultants debate frameworks. Policymakers debate definitions. Working groups debate priorities.

Yet while the industry argues about where attention should be directed, it is ignoring the elephant in the room. While significant sums are spent on climate risk modelling, relatively little of that expenditure is invested in climate solutions. Instead, it is absorbed by reporting, disclosures, scenario analysis, governance processes and compliance exercises.

It is the equivalent of leaving the tap running during a drought.

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Climate won the budget battle years ago

Many commentators correctly point out that climate is not the only risk pension schemes face. However, if we follow where schemes are spending money, climate has already become the dominant sustainability issue in UK pensions.

Tens of millions of pounds are spent each year across the industry on climate reporting, emissions measurement, governance, regulatory compliance, consultancy advice, stewardship and scenario analysis.

Current spending on TCFD reporting and implementation reports is conservatively estimated at around £30m annually. This includes consultancy costs but excludes legal fees, communications exercises and the considerable internal time devoted to collecting data and preparing disclosures.

Some schemes spend more than £500,000 a year on climate reporting. For smaller defined benefit schemes, implementation reports can consume a significant share of their annual investment consulting budgets despite often producing largely generic outputs. As many of these costs are fixed regardless of scheme size, they represent a continuing drain on resources.

No other sustainability issue attracts anything close to this level of expenditure.

The question, therefore, is not whether climate deserves attention. It clearly already receives it.

The real question is whether the industry is directing that attention through the right mechanism.

Reporting has become a tick-box exercise

The original intention behind climate disclosure requirements was sound. The goal was to help pension schemes recognise climate change as a financial risk, improve decision-making and encourage more resilient long-term investment strategies.

But somewhere along the way, reporting became the objective rather than the means to an end.

TCFD-style disclosures require schemes to describe risks and opportunities, but they do not require meaningful action. Many schemes now spend months preparing climate reports that are read by only a small group of specialists. Consultants, advisers, trustees and asset managers devote substantial time to satisfying regulatory requirements, often with limited impact on investment outcomes.

At an industry level, this represents an enormous commitment of resources.

Every pound spent producing another descriptive report is a pound not spent identifying climate investment opportunities. Every hour an ESG specialist spends reviewing disclosure wording is an hour not spent helping schemes invest in renewable infrastructure, climate technology, energy transition projects or natural capital.

Why transition plans are the necessary replacement

TCFD reporting tells us what the weather might look like; it does not tell us how to build shelter.

To drive real capital allocation, the industry must move from static risk descriptions to dynamic transition plans.

Transition plans differ from current reporting regimes in three important ways.

First, they force specificity. While disclosures often allow broad statements about risks and opportunities, credible transition plans require clear milestones, interim targets and defined pathways for capital deployment. They move the conversation from “what could happen” to “what we will do”.

Second, they align incentives. Current reporting often creates a compliance exercise. Transition planning can link board oversight, manager selection and remuneration to measurable progress. Climate action becomes central to investment strategy rather than an adjacent reporting function.

Third, they unlock private markets. Most climate solutions sit outside listed equities and bonds. They require patient capital, specialist expertise and active partnerships. Robust transition plans encourage schemes to engage with private asset managers, government-backed institutions and project developers, shifting their role from passive observer to active financier.

There are already good examples of how this could be turned into practice: a group of industry professionals have proposed a transition planning code that could work with pension schemes and take their situation into context. They have written a transition plan for a £5m scheme with an index tracking mandate only. The plan offers them actions they can take and cost 1/3 the cost of an implementation statement.

The resource constraint nobody talks about

The pensions industry often behaves as though sustainability expertise is unlimited.

It is not.

There is a relatively small pool of sustainability specialists across pension funds, consultants, fiduciary managers and asset managers, and many are already stretched.

Imagine what could happen if even half of those resources were redirected.

Instead of debating emissions metrics, specialists could help schemes assess private market opportunities. Instead of preparing another climate report, they could work with government and investment partners to create investable solutions. Instead of measuring transition risk, they could be financing the transition itself.

A drought of action

The UK is not short of opportunities.

The country has innovative companies developing climate technologies, improving biodiversity outcomes and supporting the transition to a lower-carbon economy. It also faces substantial infrastructure investment needs as it modernises its energy system and seeks long-term growth.

At the same time, pension schemes collectively control more than £2 trillion of assets.

Yet capital flowing into the transition remains well below its potential.

The industry has become increasingly sophisticated at describing climate risk. More work is still needed, but not every pension fund has the capacity to lead it. While expectations have emerged that every scheme should produce detailed climate disclosures, the industry has become far less effective at financing climate solutions.

That is the drought.

Meanwhile, the tap remains open as money continues to flow into reporting exercises that generate little real-world impact.

We don’t need another debate

The industry does not need another debate about whether climate is more important than nature.

It does not need another consultation on sustainability priorities.

It does not need another reporting framework.

The spending patterns already tell us what the priority is.

Climate is urgent and has already won that battle. The challenge now is ensuring that climate expenditure produces climate outcomes.

Every regulator, policymaker and trustee board should be asking one simple question: What proportion of our climate budget is being spent creating change rather than describing it?

For many schemes, the answer may be uncomfortable.

Turn Off the Tap

The next phase of pension sustainability cannot simply involve producing more disclosures. It must involve redirecting resources away from low-value reporting and towards high-value action.

That means simplifying disclosure requirements and replacing repetitive, backward-looking reporting with practical transition planning that drives capital flows.

By freeing sustainability professionals to focus on investment opportunities rather than compliance exercises, we can begin to address an uncomfortable reality: the greatest barrier to climate investment may now be the reporting machinery created to encourage it.

The UK pensions industry does not suffer from a shortage of climate attention. It suffers from a shortage of climate action.

If pension schemes are to contribute meaningfully to the energy transition, support UK innovation and help deliver long-term growth, the solution is obvious: replace the tap with a pipe.

Use the money saved from redundant reporting to fund the transition directly, because when you are in a drought, the last thing you should do is let the water run down the drain.

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