Pension Schemes Bill

Baroness Janke Excerpts

Thursday 5th February 2026 Grand Committee

Some 30 local councils, including many that are administering authorities, have passed a motion or issued a statement committing to support Local Government Pension Scheme divestment from companies enabling, for example, violations of international law by the Israeli Government. I ask my noble friend the Minister to accept the power that this amendment offers: it would enable the Secretary of State to make regulations preventing pension scheme investment in situations that would or could put the UK in breach of its international obligations, or to devise a similar power to like effects.

[Baroness Janke (LD)]

My Lords, I apologise that I was unable to speak at Second Reading, but I support the amendment spoken to by the noble Lord, Lord Hendy, which I have signed. The amendment seeks to remind the Government of existing obligations under treaties and other international law with regard to measures in the Bill. Many existing, relevant statutes and treaty obligations apply here. However, the amendment applies in a neutral way across a range of international contexts. It does not single out any country, but instead sets out clear expectations for how pension schemes should “identify, prevent and mitigate” involvement in serious human rights abuses and breaches of international law by taking proportionate steps to responsibly exit investments where necessary.

One example of where the amendment could apply is China, specifically the Uyghur region. International human rights organisations, including Human Rights Watch, have documented crimes against humanity committed by the Chinese Government against Uyghurs and other Turkic Muslims. These crimes include mass detention, forced labour, cultural and religious erasure, and family separation. Pension fund investments connected to supply chains benefiting from forced labour or other crimes against Turkic Muslims raise clear risks of complicity in these abuses.

The noble Lord, Lord Hendy, mentioned Israel and the Occupied Palestinian Territories. Research has found that the Local Government Pension Scheme holds approximately £12.2 billion in companies linked to alleged violations of international law by Israel. This includes investments in firms supplying weapons, surveillance technology and military equipment to the Israeli armed forces, as well as companies engaged in the construction, financing and maintenance of illegal settlements in the occupied West Bank. These activities have been widely recognised as contributing to war crimes and systems of repression and persecution against Palestinians.

The third example is Yemen. Saudi Arabia and the United Arab Emirates have led military operations in Yemen that have repeatedly involved unlawful airstrikes on civilians and civilian infrastructure. This raises serious concerns about investments in companies supplying arms, military equipment or logistical support used in the conflict. As we have heard, the UK already has duties under international laws not to aid or assist serious breaches of international law, and to prevent human rights harms connected to state-linked corporate activity. The amendment simply clarifies how those duties would apply to public pension fund investment and would make them operational in domestic law.

The amendment provides guidance around fiduciary duty versus international legal obligations. As we heard earlier, fiduciary duty requires lawful, prudent and long-term decision-making. It does not require maximising financial return at any cost, nor does it permit public bodies to disregard the UK’s international law and human rights obligations. The clear regulation provided by the amendment would help address uncertainty and hesitation by setting out how those obligations should be reflected in investment decision-making in a lawful and proportionate way.

The amendment would also provide clarity and consistency. At present, administering authorities are left to interpret complex international law obligations on their own. The LGPS advisory board has said that it has reached the limits of what it can do without government guidance. The amendment would place a responsibility on the Government to provide clear advice on these issues, while ensuring that pension funds such as the LGPS are acting within the Government’s legal obligations.

I thank the noble Lord, Lord Hendy, for proposing this important amendment. I very much hope that the Government will look at its content and support its inclusion in the Bill.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I welcome the contribution of the noble Lord, Lord Pitt-Watson—may there be many in the future. In coming to the Moses Room for the pensions Bill debate, I never thought that I would have to declare an interest, but according to the Companion I need to say that I am the president of the Liberal Democrat Friends of Israel. I need to put that on the record because of what has been said.

I understand where we are coming from, but the trouble is that in the modern world, investments are global. You do not necessarily have one cup being manufactured in the UK or in the countries mentioned by noble Lords. Very often, you have bits of equipment manufactured here, in Israel, in America and elsewhere. I give the F35 aircraft as an example: the parts are assembled from all parts of the world. It becomes a global thing, and it is difficult in the global economy to identify where something is manufactured or whatever.

The point at issue—it is a good point—is that trustees have to make the decision. They will take into account all the points made by the noble Lord, Lord Hendy, and my noble friend Lady Janke, but at the end of the day they have a fiduciary responsibility to their members. This is not the first time this has happened. Hertfordshire very recently had an amendment to divest from one country. It was passed on the chairman’s vote. What happened? It went back to the pensions committee of Hertfordshire County Council, which decided that its fiduciary duty was not to make political statements but to look after the investments under its control. Whether it is Myanmar, Israel, China or Russia, it is a very slippery slope when you do that. So, as people involved in pensions, we have to leave it to the trustees to use their judgment, taking into account all the factors that the noble Lord, Lord Hendy, and others mentioned. It is a fiduciary judgment. Our view is that the fiduciary duty should be robust, not restrictive, focused on long-term member outcomes, informed by real-world risks and clear enough to avoid defensive or overly narrow decision-making. I do not support this amendment.

[Baroness Janke (LD)]

I belatedly state my interest: I am a member of the LGPS. I apologise; I should have said that at the beginning of my speech, so I just put it on the record.

[Baroness Sherlock (Lab)]

My Lords, I thank all noble Lords for introducing their amendments. On top of the usual suspects, it is nice to welcome my noble friend Lord Hendy and particularly my noble friend Lord Pitt-Watson, who was brave enough to come to Committee and speak on these kinds of topics when he has only just made his maiden. We should all be delighted to have him here, and I especially thank him for his kind words about the Committee. It is a joy, and I look forward to having him here for many more pension debates.

Amendment 204 from the noble Baroness, Lady Stedman-Scott, gives me an opportunity briefly to update the Committee on how the Government are unlocking pension fund investment in projects with social and environmental benefits. We have talked quite a bit about the Mansion House Accord in recent Committees—for newcomers, this is the commitment by 17 major workplace pension providers to invest at least 10% of their default DC funds in private markets by 2030, with a minimum of 5% ring-fenced for UK-based assets.

The Government welcome this initiative because it is going to see funds flow into major infrastructure projects and clean-energy developments. The Sterling 20, set up in October 2025, is a new investor-led partnership between 20 of the UK’s largest pension providers and insurers and will be channelling billions into affordable housing, regional infrastructure and broadband. Initiatives such as the £27.8 billion National Wealth Fund will help increase the UK pipeline of investable opportunities. It is a UK government-created public finance institution designed to crowd in private capital, including pension investment, towards clean energy, low-carbon infrastructure and social housing projects.

This is already happening. Pension schemes have the flexibility to invest in bonds, social housing and green technology where such investments are in members’ best financial interests. Industry is clearly acting. Legal & General has pledged $2 billion by 2030 to deliver 10,000 affordable homes and create thousands of jobs. Nest has committed £500 million to Schroders Capital, including £100 million for UK investments and £40 million for rural broadband. The measures in the Bill, especially those relating to scale and governance for occupational and local government pension schemes, are intended to ensure that pension schemes reach the levels of scale and expertise to be able to invest more in a broader range of assets, including social infrastructure. The Government will be able to monitor those commitments.

It is always a delight to hear the noble Baroness, Lady Stedman-Scott, being passionate about the issues in which she has such experience. I understand the intentions behind the amendment, but the Government are worried that the proposed statutory review-and-fix framework could make the system more complex and costly to operate without a clear enough indication it would deliver better results for savers. However, I am with my noble friend Lord Pitt-Watson that we should all keep talking about these issues. It is one of the debates in which we share so many objectives. We are just talking about the best way in which to do this.

I turn to Amendment 218C from my noble friend Lord Hendy. Again, I fully recognise the intentions behind it and the concerns about human rights issues and investment decisions. UK pension schemes are, in general, not just passive holders of capital but long-term responsible investors required by the regulatory framework to assess environmental, social and governance—ESG— factors across policy setting, integration, stewardship and reporting, all grounded in their statutory duty to consider financially material risks. In many schemes, responsible investment policies set clear expectations on human rights standards. For example, the People’s Partnership policy explicitly sets out how it identifies, manages and mitigates these risks.

UK pension funds invest globally, as my noble friend Lord Pitt-Watson said, but within strict fiduciary duties, requiring them to prioritise members’ long-term interests, rather than simply chasing the highest return. Ethical considerations, including human rights, therefore increasingly shape capital allocation decisions as trustees weigh financial returns alongside reputational, social and sustainability risks. That role carries a significant responsibility for thorough due diligence across the portfolio. Fund managers will typically undertake screening to ensure companies meet minimum ESG standards, including sectors such as weapons, tobacco or fossil fuels and identifying weak labour rights or sustainability practices. Such screening helps manage long-term financial and reputational risks.

A core part of this is human rights due diligence assessing company policies, supply chain practices, labour standards and processes for addressing risks such as modern slavery. Managers also consider controversy histories, sanctions lists and engagement records to identify systemic concerns that may warrant action or divestment. Governance factors, board effectiveness, anti-corruption controls, executive incentives and transparency are also examined, as weak governance signals elevated long-term risk. Investors increasingly expect companies to provide meaningful ESG and human rights data consistent with UN recommendations placing risks to people and planet at the centre of decision-making.

We have seen internationally, most notably in the Netherlands, that funds will divest from companies linked to UN-identified human rights violations. UK schemes, too, are acting. We heard mention of LGPS funds. Southwark has divested itself from companies linked to conflict and genocide. In the private sector, People’s Pension withdrew £28 billion from State Street over reduced ESG and human rights engagement, reallocating the assets to managers with stronger stewardship commitments. These actions demonstrate a clear readiness to adjust strategies where human rights issues affect long-term value or reputational risk. To support such decisions, UK investors draw on respected international frameworks, including the UN guiding principles on business and human rights and the OECD guidelines. Evidence from the 2024 DWP call for evidence shows that trustees actively using these standards and the UN Global Compact to guide their management of social risks.

The DWP and the Pensions Regulator also provide guidance on social factors. The 2024 Taskforce on Social Factors offers practical support on risks such as modern slavery and child labour. As part of our forthcoming statutory guidance on trustee investment duties, we will consider how to embed further practical examples of good practice, from schemes such as Nest, Brunel and People’s Partnership, ensuring that trustees of schemes of all sizes can draw on proportionate, real-world illustrations of effective human rights risk management.