My Lords, I shall speak to Amendments 52, 74, 75, 76 and 92 to which I have added my name. As the noble Baronesses have said, these amendments refer to the need to strengthen the obligations on pension funds to play their part in meeting the challenge of the climate emergency. We accept that the issue goes wider than
this Bill, but we will succeed only if every part of government, including the DWP, industry and the economy play their part, so this pensions Bill does have a part to play.
In relation to pensions, it is vital that a consistent approach is taken across the pension scheme market with the DWP, the Pensions Regulator and the Financial Conduct Authority all requiring contract-based pension schemes and trust-based occupational schemes to demonstrate the same levels of compliance with our climate change objectives; otherwise, there could be adverse competition between the different funds, which we do not support.
I add my thanks to the Minister for acknowledging the importance of these issues when we raised them at Second Reading, arranging to meet us to discuss them further and tabling the Government’s amendment today. As the noble Baroness, Lady Hayman, said, it happened very quickly, and we were very impressed by that. It is fair to say that it is a start, but we do not think that it goes far enough. However, I am sure that we will have a good dialogue on this issue. In the meantime, we have tabled amendments.
I shall be brief as I do not want to echo what other noble Lords have said. Amendments 74 and 76 take out the specific reference to occupational pension schemes so that the requirement would apply to all pension schemes. This is important because, although occupational defined benefit and defined contribution schemes comprise a large part of the pensions market, there is a gradual shift taking place towards contract-based personal schemes. As one model is regulated by the Pensions Regulator and the other by the Financial Conduct Authority, it is vital that we take this opportunity to provide alignment and consistency on the climate change action that they require across that sector.
In the Minister’s helpful letter to Peers explaining the purpose of the government amendments, it did not seem to me that she addressed this lack of consistency. Perhaps she can do that now. Does she accept the need for a joint approach across the regulators to ensure that investment decisions have parity, so that one cannot take advantage of the other or lead to the detriment of members by requiring higher standards of one than another?
Secondly, our Amendment 75 explicitly spells out that the Government’s reference to climate change means the need to align with the objectives of the Paris agreement to hold temperature rises well below 2 degrees centigrade. It is important to have that wording in there because we bandy around the expression “climate change” but it means different things to different people, and we are concerned that it could otherwise be loosely interpreted. That is why we set out a more explicit requirement. We set out the reasons for that requirement at Second Reading. As other noble Lords have said, we are currently on track for 2 to 4 degrees centigrade of global warming by the end of the 21st century, and we know that that will have a profoundly negative impact on the global economy and therefore upon the investments and the financial returns of pension schemes. So it is important that we have a requirement to deliver our Paris agreement commitments. It is not just about us being fluffy and
caring about the planet; it is a more hard-nosed issue about the direct interests of savers and our economy. That is why pension funds have such critical role to play. I hope that the Minister will accept the intent and the importance of that amendment.
Thirdly, I was pleased to add my name to Amendment 92, which provides a timescale for the consultation on implementing the recommendations of the Task Force on Climate-related Financial Disclosures. It requires that the consultation will commence within one month and be completed within one year. Obviously we welcome the Government’s intention to consult widely on this issue, and we understand some of the complexities that lie behind all that, but meanwhile the clock is ticking on our Paris commitments and we are failing to step up to the mark on that, so this is one of the many areas where we need to take urgent action but also where we could deliver the biggest impact. I hope that the Minister understands and accepts the need for that consultation and follow-up to take place within a specific timeframe.
Finally, our Amendment 52 returns to the issue that we raised at Second Reading about the need to inform pension savers via the dashboard of the actions being taken by their trustees to deliver on climate change as set out in the UK Stewardship Code 2020 and to align with the Paris agreement. This amendment would add these factors as information that may be required to be provided by regulation. I know that at Second Reading there was some argument—maybe there will be again today—about the information on the dashboard needing to be kept simple in the first instance. We understand that issue, but we also have to acknowledge, as the noble Baroness, Lady Hayman said, that pension savers are concerned about their pension funds propping up fossil fuel extraction, and they are keen to have information so that they can be empowered to take action on these issues. Our amendment has been tabled to explore how best we can achieve that by providing information in a simple and meaningful way to pension savers.
I hope that the Minister will agree that savers need to have access to this information and that the dashboard could be a meaningful way of achieving that objective. I look forward to her response.