Pension Schemes Bill [HL] — House of Lords, 2020-06-30
Topic: Environment
Helene Valerie Hayman (Crossbench, Unknown): My Lords, I remind the House of my interests as a co-chair of Peers for the Planet. I should perhaps also declare that my son works for a new campaign, Make My Money Matter, which is being launched today by Mark Carney and Richard Curtis. It encourages all of us to be more active to ensure that our pension schemes reflect our values and that they protect both our financial and environmental future—an indication perhaps that consumer pressure on issues like climate change in relation to pensions is on the rise from that described by the noble Lord, Lord Balfe. In that context, perhaps I should warn the noble Lord, Lord Naseby, that as a pensioner under the parliamentary fund, I may come and discuss these issues with him later. As the noble Baroness, Lady Janke, said, I have Amendments 73 and 79 in this group, which are cross- party. I will also speak to government Amendments 75, 76, 77 and 78, which cover the same ground—I know that the Minister would say "cover that ground more comprehensively" At this stage, it is appropriate that I join others in thanking and praising both the Minister and her officials for the amount of work and careful consideration they have given to these issues and for their responsiveness to the issues that have been raised. We have moved some distance from the start of the Bill, from a position where there was no provision on climate risks to provisions for a regulatory framework that takes into account our objectives under the Paris agreement and which will ensure that trustees and managers are required to assess and report on their scheme’s alignment with the objective to keep global warming to 1.5 degrees centigrade. That includes assessing and reporting on how their schemes are exposed to the effects of climate change and on how the assets of the scheme themselves contribute to climate change Improving disclosure in this way is essential for consumers, who need to understand the risks attached to their personal investments. It is also essential for trustees, as greater transparency will help drive their behaviours and decisions, and trustees will need clarity on what is required of them and a clear signal of the long-term trajectory that the sector will need to follow if we are to achieve our net zero targets The two amendments that I have tabled are drafted very simply—some might say simplistically. They are broad and would apply to any regulations made under the Bill. Amendment 73 ensures that, in making regulations, the Government take account of international climate change treaties of which the UK is a signatory. It also ensures in turn that regulations require trustees or managers to take account of such treaties in addition to the existing general provisions to secure effective governance of a scheme with respect to the effects of climate change Amendment 79 ensures that regulations can place requirements on trustees or managers to publish information about how schemes have taken into account the objective to keep global warming well below 2 degrees centigrade or any other future targets under international treaties. That is critical, because disclosure will create pressure on trustees to reduce schemes’ contribution to climate change As I have said, the Minister has been extremely responsive, and we have had a constructive dialogue about these amendments. She has put down Amendments 75 to 78, which are, I hope, more comprehensive but slightly less comprehensible to the lay person. I will ask a couple of more technical questions, which I would be very grateful if she could respond to The first question is on Amendment 75 and addressing climate risk. Although the most significant climate-related risks which pension schemes face long-term are not idiosyncratic to particular companies, sectors or geography, they arise from system-level macroeconomic and financial stability risks caused by the impacts of climate change and a disorderly transition. Yet in fact the three material climate risks to portfolios that managers identify tend generally to focus on the risks associated with the transition to a low-carbon economy over the physical risks of climate change. I therefore hope that the Government will confirm the broadest possible definition of the risks in the Bill, meaning transitional, physical, financial and systemic On Amendment 76, I would be grateful if the Minister could confirm that proposed new Clause 41A(4A) and (4B) apply across all the regulations to be made under the Bill, rather than applying only to regulations referred to in new Clauses 41A(3)(b). That is essential if consideration for international and other climate change goals is to permeate the regulatory framework as it should On Amendment 76, again I would like some confirmation. There is reference to "or other climate change goal." Can the Minister confirm that that includes our domestic net zero target—I think that was very much the intention—and that there will not be any diminution of our targets On Amendment 77, again, the reference is to Article 2(1)(a) of the Paris agreement, but does that encompass provisions in Article 2(1)(c) as well, which relate to financial flows and therefore seem to be relevant Lastly—the Minister will be glad to know—on technical issues, can the Minister assure me that Amendment 78 does not limit publication requirements to information on the effects of climate change on schemes but that it also covers the contribution of the assets of schemes to climate change?