Pension Schemes: Guidance

Baroness Hayman Excerpts

Monday 13th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

As I have said before, it is the case that more progress needs to be made, and the noble Baroness has much experience in this field. Let us start with climate change, which poses major financial risk to pension schemes and savers’ returns, with almost £2 trillion in assets under management. I reassure her that pension schemes in scope of the DWP’s requirements, as I think she will know, must produce the annual TCFD report, which is based on four key pillars: governance, strategy, risk management, and metrics and targets. That might be five, but I think it is four.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. Has this afternoon’s discussion not illustrated that there is a lack of clarity about how fiduciary duties are interpreted in terms of the long-term risks and possibilities of climate change-related investments? Therefore, would the Minister reconsider having a conversation with his colleague, the noble Baroness, Lady Penn, about the amendments on this point to the Financial Services and Markets Bill?

[Viscount Younger of Leckie (Con)]

I can certainly pass the message on to my noble friend. On fiduciary duty, the noble Baroness will know that trustees have a duty to act overall in the best interests of members. This has been traditionally interpreted as covering risk-related returns as well. We made clear in our 2022 stewardship guidance, perhaps as an assurance, that trustees should be considering whether climate change risk is financially likely to be a material risk.