Peers in the House of Lords have shown their support for amendments to the pensions bill which will force schemes to report on their climate change strategies as well as how their investments support wider climate goals.
Peers debated amendments made to the Pension Schemes Bill in the House of Lords yesterday afternoon (February 26), with the majority showing support to a clause which will force pension schemes to disclose how they will align their investment strategies with the goals of the United Nations Paris Agreement on climate change signed in 2016.
According to the amendment, pension scheme trustees will have to review the impact of climate change on their investment strategy, manage their exposure to these risks and determine targets for their exposure.
Another amendment called for consumer dashboards to include information on how pension schemes’ investments align with the UK Stewardship Code and the objectives of the Paris Agreement.
These amendments would make the UK the first country in the world to align the actions of pension schemes with the agreement.
The Paris Agreement seeks to limit the increase in global average temperatures to 1.5°C above pre-industrial levels.
Baroness Hayman, who put forward both amendments, said providing this sort of information on the pensions dashboards would help drive an increase in savings as many people nowadays have a strong interest in environment, social and governance issues.
She said: “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.
“Most savers are unaware of how their pension savings are invested and of the impact that they can have, and approximately 97 per cent 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.”
Baroness Jones of Whitchurch backed this proposal saying it was vital savers had access to this level of information so that they can make informed choices with their pension funds.
She said: “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.”
However she warned there must be a consistent approach across the pension schemes industry in regards to reporting on climate change.
Baroness Jones said the Department for Work & Pensions, the Pensions Regulator and the Financial Conduct Authority must ensure all schemes demonstrate the same level of compliance with the bill’s climate change objectives.
Otherwise there is a risk “there could be adverse competition between the different funds”, which the Lords “do not support”.
Baroness Hayman said: “The UK has set itself a clear timetable to reach net zero emissions by 2050 so we need a correspondingly clear timetable to align the pensions sector with the objectives of the Paris Agreement.
“The government’s move to enable the creation of an oversight, disclosure and compliance regime reflecting the Task-Force on Climate-Related Financial Disclosures’ recommendations is welcome but it does not require pensions schemes to provide information on how their investments align with the objectives of the Paris Agreements, not all schemes are covered, and there is no timetable by which any new regime will be in place.
“Overall, there are too many opportunities for regulations to be watered down or delayed.
“The amendments I and others from across the house have tabled address these deficiencies, as well as giving consumers better information and a chance to influence how their money is being invested.”
The Pension Schemes Bill will have another reading at the committee stage in the House of Lords on March 2.
The bill will then proceed to report stage before having its third reading and being passed to the House of Commons.
It is expected to reach the House of Commons by Easter.
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know
