My Lords, I added my name to Amendment 28, which the Baroness, Lady Altmann, has just cogently explained to the Committee. I will speak to that, as well as to my own Amendment 52, about the information available for dashboards. I shall also speak to Amendments 74, 75, 76 and 92, which, as the noble Baroness mentioned, seek to strengthen the Government’s welcome Amendment 73, which recognises the salience of climate change to pension funds and to the Bill. I remind the Committee of my interests as co-chair of Peers for the Planet, and that my son works for Make My Money Matter.
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The rationale behind all the amendments to which I am speaking relates to the climate crisis and the ways in which it needs to be taken into account in pensions legislation and regulation. There are three main areas of focus and salience for doing this. The first is to ensure transparency, so that individuals have the relevant information and therefore the choice over, and power to influence the behaviour of, the funds in which they are invested, on which they will depend for their pensions now or in the future. There is much survey evidence to show that this is a priority for savers and that there is an appetite for environmentally responsible investment. In an article in the Telegraph, the then Secretary of State for Work and Pensions, Thérèse Coffey, and the outgoing Governor of the Bank of England, Mark Carney, said:
“People must be able to see and understand whether their funds are invested in line with the values that they hold.”
The second driver of these amendments is to protect the interests of savers by shining a spotlight on how effectively scheme managers and pension funds are planning for, and mitigating the risks of, the effects of climate change. As the noble Baroness, Lady Altmann, said, there have been a large number of surveys and reports, such as from Mercer and Aviva, as well as the research by JP Morgan reported in the papers this weekend, which paint a grim picture of the effects on
financial institutions and the economy if measures are not taken. Climate change and the threats to the economy that it poses are financially material issues for funds. It is clearly part of the fiduciary duty of pension fund trustees to act in the long-term interests of investors. This is fundamental information, which should be available in dashboards and other areas.
The third element behind these amendments is to encourage pension funds to use their huge economic power to play their part in meeting our 2050 targets and in transforming our economy to thrive in a low and zero-carbon environment. UK pension funds hold more than £1.6 trillion in assets. The size and influence of pension schemes mean they have a vital role to play in ensuring that the UK meets its climate commitments, as the Environmental Audit Committee noted in its Greening Finance report.
Those are the rationales behind the amendments. On Amendment 28, as the noble Baroness said, the report by the UK Sustainable Investment and Finance Association showed that two-thirds of schemes were not actually publishing their SIP. The proposal in the amendment to set up a registry—which has been done before with the modern slavery registry—is a good example of how this could work. It would ensure that all schemes would be covered and that all ESG, not just climate change, would be covered.
I would also support Amendment 36 in the name of the noble Baroness, Lady Bennett, which goes slightly wider by ensuring that implementation statements and chairs’ statements would be made available to the Pensions Regulator.
My Amendment 52 would ensure that consumer dashboards include information on how pension schemes’ investments align with the UK Stewardship Code and the objectives of the Paris agreement. As well as supporting transparency, there is a strong interest among savers in environment, social and governance issues, so the provision of greater information can also help to drive an increase in savings. DfID research into people’s views on sustainable investment has shown that more than two-thirds of UK savers would like their investments to be responsible and impactful. Aviva, which has done much work in this area, found that 57% of people expect ESG or ethical investment options in a workplace pension and 30% say that pension providers are responsible for making sure that their savings are used for good, yet most pension savers are invested in non-ESG funds. Most savers are unaware of how their pension savings are invested and of the impact that they can have, and approximately 97% of savers are invested in the default funds, which invariably take little account of ESG and are far from Paris aligned. Dashboards will be extremely significant as a portal for savers, investors and pensioners to know what is happening to their money, and it is therefore important that they have a full range of information on these issues.
Again, the noble Baroness, Lady Bennett, has tabled Amendments 67A and 67B in this area, and I support them.
My last set of amendments—Amendments 74, 75, 76 and 92—is aimed at enhancing and strengthening government Amendment 73. I pay tribute to the Minister for instant action. The original Bill made no mention
of climate risk, and it was pleasing to see that the Government issued this amendment to insert a new clause to ensure that there will be secondary legislation to create an oversight, disclosure and compliance regime, in line with the TCFD recommendations, for occupational pension schemes in relation to climate risk. However, the Minister will not be surprised that, having given something and opened the door, I will try to push it a little further.
At the moment, Amendment 73 relates to occupational pension schemes. Amendments 74 and 76 cover all pension schemes. I would be grateful to know from the Minister the number of people who would be excluded under the Government’s amendment rather than my amendments, which would include everybody, and the rationale for excluding those people.
Amendment 75 is important, as it would ensure that the proposed regime imposes requirements on trustees or scheme managers to ensure that schemes are aligned with the objectives of the Paris agreement to hold the increase in the global average temperature to below 2 degrees. I think we all know by now that what we are talking about is 1.5 degrees. The UK has set itself a clear target; we have COP 26 this year; and we are aiming to be a beacon of achievement in many areas. This is one area where we could shine as that beacon. Not to align the pensions industry with the Government’s overall objectives is to miss an opportunity.
Lastly, my Amendment 92 seeks to ensure that there is a clearer timetable for consulting on the implementation of TCFD recommendations. We now have a clear timetable in statute by which we must reach net zero, so we need a correspondingly clear timetable for aligning the finance sector with the Paris objectives. We, and others such as ShareAction, believe that new regulations can and should be introduced by next year, so my amendment would set a timetable both for the commencement of the consultation and for the Government’s report on the results of that consultation.
There are other amendments in this group aimed at the same objectives. I will be interested to hear what other members of the Committee have to say and the Minister’s response.