My Lords, the noble Baroness, Lady Bennett, opened the debate on this group with a request for more detailed information from collective money purchase schemes, particularly on the environment. That is entirely right and very appropriate when we move on to Clause 124, which is quite another matter. It builds on the 1995 and 2004 Acts, which refer to injunctions on trustees to produce statements of funding. That is a wide request; one can imagine all sorts of matters that trustees would wish to put into their statements.
It is not the same thing at all, however, as focusing on the risk of climate change, which is a much more accurately aimed request. The change risk, of course, is against the background that climate change, as in the use of the English language, is neutral, but I do not think that that is what we have come to mean by climate change. We should be careful not to use language inaccurately. I think that what we really mean is man’s contribution to, or effect on, the climate and what actions the world’s population have taken that affect the climate. That is considered in general to be something about which we should be very concerned. When it comes to considering the environment, who can avoid being incredibly concerned?
In the Government’s approach to how to deal with this matter, climate change is defined in the Bill as relating to Paris, its two-degrees limit on the rise in temperature from pre-industrial periods and other climate change goals. This is potentially a demanding and widely drawn comparison with things that have
applied to trustees to date. We have to take care in our expectations of what it is reasonable for trustees to decide as they carry out their role in the interests of their members. They rely very heavily on advice. Their actuaries, who are often rather disregarded figures in the world of pension management and in our debates on pensions, have a wide knowledge of what is going on in pensions as a whole and why it is the way it is.
Trustees have to take very professional investment advice, of course. Like my noble friend Lord Balfe, they may decide that trackers are the best thing for them, but in many schemes, the investment decisions will be very detailed and always based on advice. Those advisers—the investment industry as a whole—can safely be assumed to know that there are huge issues relating to climate change and the environment, so their advice will be shot through with that understanding. Of course, there is also in the life of the trustees the employer, who can also be judged as knowing what is going on and understanding how he would like to see his trustees view these complicated matters.
Noble Lords should rest assured that these are complicated matters. It has been a long time since I was a pension trustee; nevertheless, there was always a huge debate about how to balance your portfolio, what to hold in it and what not to hold. The environment is not a thing for the future, of course; it is a thing for today. It is already part of our life; it affects our daily lives, to the extent that the world is already warmer. Those effects are connected to the temperature that we experience and the environment in which we live. When we come to consider the responsibilities of trustees to their scheme members, however, we need to be a bit cautious about how far down this complicated road we expect trustees to go when their members will be much more focused on their daily lives than on the way in which the powers that be are tackling these very difficult issues.
The Government’s stall is set out in Clause 124 and Amendments 75 to 78, which contain discretionary powers. They leave the opportunity to observe events and gauge responses to the problems we face before taking too much action, and they leave flexibility, as in their reference to other climate policies.
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The position taken by the Opposition in their amendments in this group is very different. They want us to move immediately to mandatory conditions, as the two changes from “may” to “must” show very clearly. The references to treaties are not confined to a fairly narrow definition, with the option of other climate change policies; they are very specific. Indeed, if Amendment 79 is agreed to and enacted, it will bring about a major increase in trustees’ responsibilities in times when they will have a very large number of different things to think about because there is such a measure of uncertainty and doubt about where we are. Indeed, when one comes to the specifics, with the Paris Agreement and much else, where would trustees now get advice that they could rely on, and from whom, about the right position to adopt on these difficult issues?
I suppose that there is a difference here between the Government’s approach and the Opposition’s amendments, and that illustrates our dilemma as we
manoeuvre our way forward in our complex, consenting democracy. Do we make the conduct of pension affairs more and more a matter of law or do we rely on the knowledge and behaviour of those responsible, retaining the ability to intervene when necessary? As the Prime Minister has been wont to say, common sense, not legal enforceability, should be relied upon to the greatest extent. If we were to have a lot more law, would it be enforceable or would that become something of an illusion?
I support the Government’s cautious approach. I welcome it and I think that it is the right way to go forward for the time being.