Pension Schemes Bill

Baroness Griffin of Princethorpe Excerpts

Report stage
Monday 23rd March 2026 Lords Chamber

[Baroness Griffin of Princethorpe (Lab)]

My Lords, I have added my name to Amendment 170 and will speak briefly in support. The noble Lord, Lord Sharkey, has comprehensively set out the amendment and, following very helpful feedback from my noble friend the Minister, I will simply respond to a few points which were made by other Peers in Committee.

It was suggested that the UK is a small player in thermal coal and will not make a difference. We actually have the largest volume of pension assets in Europe and the third largest globally. There is no limitless demand for high-risk assets, so were the UK pension sector to sharply lower its exposure, this would not lead to a rush for companies that everyone knows to have a limited lifespan. As was said:

“It seems absolutely bonkers that new money is going into new coal mines”.—[Official Report, 23/2/26; col. GC 285.]


It does not make sense in terms of protecting the environment, and it does not make sense economically to invest in stranded assets.

These investments are not only in equities but in bonds. The effect of buying equities on the secondary market may not be instant but, over the long term, it is likely to support the reduction in the cost of borrowing or increase the returns on equity funding. This ultimately supports more investment. The Transition Pathway Initiative, established by the LSE, has assessed the decarbonisation plans of the top coalmining firms. After two decades or more of engagement, none is remotely close to being aligned with the Paris agreement and, as was admitted, opportunities for future company-level engagement are strictly limited by the threat of litigation in the US. Indeed, the suggestion that an exit strategy from thermal coal inevitably means exit from tobacco, sugar or energy-using forms is scaremongering. We should judge the amendment on the basis of what it does.

As the noble Lord, Lord Sharkey, said, Amendment 170 does not require an exit from anything. It seeks only to give government the tools to monitor and manage a risk that it has quite rightly admitted that it does not currently have a handle on. Risk management is a core part of fiduciary duty on investments which have been variously judged by my noble friends as carrying high financial and climate risk. Every child deserves to breathe clean air.

I look forward to hearing from my noble friend the Minister. I am extremely grateful for her genuine engagement so far about the Government’s plans for further action in this area.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to join a distinguished cross-party group, signing and speaking to Amendment 170. Like the noble Lord, Lord Sharkey, I want to reflect back to what was said in Committee, when the Minister said that she shared the cross-party concern about pension scheme investment in thermal coal, that she recognised the high financial and climate risks, and that she welcomed some industry-led reductions in exposure. She said that the Government would

“support and challenge the sector in rising to that task”

and that the levers to do that included

“better data and better transparency”.—[Official Report, 23/2/26; col. GC 291.]

That is what this amendment aims to deliver, because the transparency is just not there now.

Transition plans are often cited as a solution to this. These were a manifesto commitment in July 2024, to meet Paris alignment transition plans, but 18 months into this Parliament, there has not been a response to a consultation which took a year to emerge, and more or less asked, “Should we do all of this?” Recently, the Pensions Minister, Torsten Bell, said that transition plans for pension schemes were not a priority, which is reinforced by the fact that the Government are not taking powers in this Bill. There have been suggestions that consolidation will fix all this, but an analysis by Corporate Adviser Intelligence shows that the DC multi-employer schemes most commonly used for automatic enrolment are in fact the largest of them and more invested in thermal coal, and that the mid-sized schemes that would be consolidated are less exposed.

It is also worth stressing that there is a precedent for Ministers writing directly to the largest pension schemes to understand their responsible investment practices and for the Government setting non-statutory expectations about pension schemes’ investment practices. Those on the Front Bench in front of me will probably not thank me for pointing out that when they were in government, they set out a non-statutory expectation in the 2019 green finance strategy that pension schemes and others would disclose climate risks in line with the Task Force on Climate-related Financial Disclosures by 2022. Later, the then Pensions Minister, Guy Opperman, wrote to the 50 largest pension schemes to request their policies and understand their climate investment strategies. That is what the previous Government were doing—surely this Government do not want to be behind that.

It is clear that there is actually a latent appetite to go further. Two-thirds of the audience, mostly representatives of pension funds, at the recent Pensions UK conference debate between Caroline Lucas, my former honourable friend, and the noble Lord, Lord Gove, agreed that pension funds were not now doing enough to tackle the climate change risks. These are, as I said in Committee, financial as well as climate risks. We simply are not taking the steps that are needed. This amendment would provide the way forward that the Minister suggested in Committee that she wanted to see. Here it is, so I hope to hear positive news from the Government on this amendment.

Pension Schemes Bill

Baroness Griffin of Princethorpe Excerpts

Committee stage
Monday 23rd February 2026 Grand Committee

Frankly, however, it feels bizarre that we have before us today and are discussing a pensions Bill, and have a Government that say they want to bring forward statutory guidance, for which they accept they need a legislative base, yet there is no sign of an amendment to underpin the Government’s own proposed solution. That is something we will have to return to, and solve in one way or another, on Report. I hope that, in her response, the Minister with both reconsider her opposition to this amendment and address in detail the problems raised by the Government’s own approach.

[Baroness Griffin of Princethorpe (Lab)]

First, I welcome the Bill wholeheartedly. In this group of amendments, we have cross-party political working, which I am very proud of. Every child in the world deserves to breathe clean air.

I speak first to Amendment 212,

“fossil fuels and climate change risk”.

This new clause would require government and the FCA to make rules and regulations on climate risk grounds, restricting exposure of some occupational and workplace personal schemes to thermal coal investments, and to review whether the restrictions should be extended to other fossil fuel investments. I will not repeat what my friend, the noble Lord, Lord Sharkey, has said, but as noble Lords will recognise, this amendment does something that we have heard rather a lot about recently—taking powers to direct the investment of pension schemes—but in a narrowly defined way, with parliamentary and industry scrutiny, and with safeguards to prevent the power being misused.

In reality, the Government and Parliament, as noble Lords have said, have been directing pension scheme investments for decades. When the Brown Government established the automatic enrolment scheme, Nest, they set a policy of 0.3% annual charge, which forced even a very large scheme such as Nest to choose investments which fitted within that tightly constrained charging envelope. When the coalition introduced a charge cap on all schemes used for automatic enrolment, the 0.75% ceiling drove the smallest schemes to exit, moved smaller schemes into overwhelmingly passive investments and limited asset and private market allocations for all but the largest schemes. Theresa May’s Government legislated for trustees to publicly report their investment policies in relation to environmental, social and governance considerations—quite rightly so.

Each of these policies has been explained on the basis that they are in consumers’ and the wider public’s interest, as in Amendment 212 of the noble Lord, Lord Sharkey, to which I proudly added my name. The amendment is in the consumer’s interest, because the immediate power of direction in this amendment would be limited to thermal coal. Pension schemes do not routinely publish sector-level investment data, but early analysis suggests that schemes still invest somewhere around £30 billion in companies with thermal coal interests. While noble Lords have been talking about the long-term investment profile of social housing or infrastructure and its appropriateness for pension funds, this coal, as the noble Lord, Lord Sharkey, so clearly said, is an ultimate short-term investment. Even the International Energy Agency’s most pessimistic scenario shows that coal demand is peaking. These investments will fail in due course but, in the meantime, they do harm to the returns of other investments in their portfolios, as well as everybody else’s portfolios, by contributing to local air pollution and global climate change.

That is why ending these investments is in the wider public interest. The £30 billion UK pension fund investment in thermal coal supports the equivalent of about 10 gigawatts of thermal coal-fired power overseas. This, with some basic arithmetic, means that UK pension schemes’ thermal coal investment emits more greenhouse gases than the whole of the UK power network.

In this way, UK pension schemes have been undermining the progress made by successive UK Governments in phasing out coal, by contributing to fund the expansion of coal overseas. I do not intend that to be a criticism of the funds. Governments have not nudged them away from coal specifically, but they have been willing to nudge and direct in other areas, including in this Bill, and they should be willing to do so here in respect of thermal coal. I kindly request that my noble friend the Minister agrees to accept this gentle nudge.

I was pleased to add my name in support of Amendment 218A in the name of the noble Baroness, Lady Hayman. As she said, in response to a similar amendment on Report in the House of Commons, the Pensions Minister indicated that

“guidance will encapsulate those wider factors set out in his new clause … including what we mean by systemic risks and standards of living. There is good support in the industry for providing that clarity”.—[Official Report, Commons, 3/12/25; col. 1043.]

It is really positive that the Government have accepted the principle that bringing further clarity to fiduciary duties is needed to tackle confusion and uncertainty among trustees around how they should best carry out their responsibilities to deliver for members.

I am delighted that my union, UNISON—the largest in the UK with a membership of over 1.3 million—has written in support of this amendment. The amendment recognises that there are wide-ranging benefits in giving legal backing to pension managers who wish to act in their members’ best interests by considering long-term systemic considerations such as sustainability. Moving in the direction of refining investor duties to allow these types of systemic-level risks to be properly quantified and acted on will help future-proof the pension system in the long-term interest of savers. For those of us not yet at pensionable age in the UK, that is quite attractive.

However, issuing guidance is unlikely to provide the level of assurance required by trustees. That is because, as my noble friend knows, pension funds need only have regard to guidance, which does not represent a stable enough foundation for interpreting duties; nor does it insulate pension funds should they find themselves defending decisions in the courts. Without clear timeframes, trustees will be left unsure as to whether guidance could be changed in the future and how they should prepare for it. Leaving these matters solely to guidance risks perpetuating the current status quo, where trustees feel they do not have permission to act in response to system-level risks for savers. Accepting this amendment would, I hope, bridge the gap between the Government’s commitment to date and their objective of removing obstacles for pension managers. I hope that my noble friend will accept it.

[Baroness Coffey (Con)]

My Lords, I have tabled Amendment 218E, which is about recognising biodiversity risk. In the previous Pension Schemes Act, we introduced additions to the 1995 Act to allow regulations to come forward regarding climate change. The significant difference between that and Amendment 212 is that it in no way mandated an approach to investment but recognised the risk that would be there. We have brought together a well-established architecture, with the TCFD, the Task Force on Climate-related Financial Disclosures, and now the TNFD, the Taskforce on Nature-related Financial Disclosures. I pay tribute to David Craig for the immense work that he has done throughout all this. I think I am right in saying that well over 700 investors around the world, with approximately £22 trillion-worth of assets, are committed to start using the TNFD once we have the proper hierarchy agreed. Being positive about it is not unique to this country; we are seeing that around the world.

One of the reasons why I decided to table this amendment now is because, while I appreciate that it has taken time to get to where we are, I do not know when next there will be a pension schemes Bill. Let us hope that there will not be one for a while, because we know that the industry needs stability.

These are serious risks, as was highlighted in the Chamber today when the noble Baroness, Lady Hayman of Ullock, answered my noble friend’s question about the TNFD and the UK’s nature security assessment. It is not just about environmental risk—it has been made very clear by the Government that we need to think about that in the long term—it is also about a balance between food security and geopolitical security. I accept that not all of those are issues that we should use our pension assets and schemes around the world to try to manage. That is not their role, but it is their role to think about the return on investment and what instability might do to pensioners’ projected payments in the future.