Pension Funds: Financial and Ethical Investments

Clive Lewis Excerpts

Wednesday 22nd May 2019 Westminster Hall

[Alex Sobel (Leeds North West) (Lab/Co-op)]

I welcome this important debate, secured by the right hon. Member for Kingston and Surbiton (Sir Edward Davey). It follows the Environmental Audit Committee’s inquiry into green finance, which he clearly read because his recommendations seem to mirror our own. It is good to see Committee members who served on that inquiry in the Chamber.

The physical impacts of climate change, such as rising sea levels and increased frequency and intensity of extreme weather events, will pose increasing economic risks for a range of businesses and investments, from food and farming to infrastructure, homebuilding and insurance. In the UK alone, climate change is projected to increase the risk that business assets and operations are damaged and disrupted by flooding, degrade some of our most productive agricultural land, to reduce water supplies, to increase the frequency and intensity of heatwaves, and to stress transportation, energy and water infrastructure. There are a great many risks for investors to consider.

For instance, climate change may result in liability risks when those who suffer losses as a result of climate change take legal action to recover damages from those who can be found responsible. For example, the city of New York is currently seeking to recover costs from BP, ExxonMobil, Chevron, ConocoPhillips and Shell as a result of flooding. Transition risks could also be faced by companies in high-carbon sectors that fail to diversify and adapt to policies introduced in response to the Paris climate change agreement. Firms that do not make a timely transition and remain over-invested in climate-changing activities could face costly regulatory action, suffer reputational damage, or see their assets become stranded as carbon prices rise. Our inquiry found several examples of stranded assets, such as oil refineries or fracking infrastructure. A Bank of England paper published in 2016 warned that

“a sudden, unexpected tightening of carbon emission policies could lead to a disorderly re-pricing of carbon-intensive assets”.

These are real challenges for pension providers and pension investors.

Our Committee heard about a range of worrying practices in the pension industry, including the fiduciary duty of pension scheme trustees often being misinterpreted as a duty to maximise short-term returns; remuneration for investment consultants and fund managers encouraging a pursuit of short-term returns rather than long-term value creation; and a tendency to under-invest in physical assets, technology innovation and employees’ skills in preference for nearer-term gains from financial mergers, acquisitions or restructuring. In the context of our climate change risk, we want none of those things.

[Clive Lewis (Norwich South) (Lab)]

It is really good to hear hon. Members talk about climate change and greenhouse gases, but there are in fact nine planetary boundaries, of which greenhouse gases are one. I wonder whether people understand that it is entirely possible that we save the planet from climate change yet kill ourselves through eight of the other planetary boundaries, two of which we are in the red for. Is it not the case that financial markets, pension schemes and so on actually need to see their remit as wider than just greenhouse gases, also covering a range of other areas, including biodiversity and carbon?

[Alex Sobel]

Absolutely. A range of factors, including air quality and the insect population and pollinators, should be taken into account. It is not just about fossil fuels, but as the debate mainly concerns fossil fuels and climate change, I will concentrate on those. I recently led a debate on insect populations. It is good that we are looking at all of that in the round.

There are structural incentives in the UK for maximising short-term returns over long-term investments, which are much more climate-sensitive. The Government should clarify that pension schemes and company directors have a fiduciary duty to protect long-term value and should consider environmental risks in the light of that. Some pension companies are taking that up, and investors are also looking for better, fossil-free pension options. A 2017 YouGov poll for Good Money Week found that more than half of 18 to 34-years-olds—the pensioners of tomorrow—would like fossil-free investments offered as standard.

We need to make progress, and the Government need to bring in stricter rules. The Committee found that the current rules are that trustees or governance committees legally must have good reason to think that scheme members would share their concerns, and that decisions should not involve a risk of detriment to the fund. However, the European Commission’s action plan on sustainable finance proposes that institutional investors and investment managers should consult their beneficiaries on their sustainability preferences and reflect those in their investment decision making, regardless of whether they are financially material. The European Commission plan states that

“institutional investors and asset managers do not sufficiently disclose to their clients if and how they consider these sustainability factors in their decision-making. End-investors may, therefore, not receive the full information they need, should they want to take into account sustainability-related issues in their investment decisions.”

I call on the Government to adopt the action plan in full; the Minister intervened earlier to say that the Government have only partially adopted it.

Pension savers should be given the greatest opportunity to engage with decisions about where their money is invested. As I said, younger generations want fully fossil-free pension options. Divesting from fossil fuels makes sense not just in terms of ethics and the climate, but as a sound long-term financial strategy. As soon as I joined the parliamentary pension scheme, I also became a supporter of Divest Parliament. According to the latest annual report, as my hon. Friend the Member for Warwick and Leamington (Matt Western) said, the fund includes stakes in BP at £7.33 million, Shell at £6.6 million, Rio Tinto at £3.67 million and Total at £2.93 million. Our own funds are being invested in those companies. It is time our own trustees heard our voices in this debate and in this place, divested our pension funds and reinvested in renewables and clean tech for our future and for the planet.

Universal Credit

Clive Lewis Excerpts

Tuesday 13th March 2018 Commons Chamber

[Ms McVey]

Actually, if the hon. Gentleman looks at what this Government introduced in the Budget, he will see that it was a package of support worth £1.5 billion for the country. What we are doing is supporting people as best we possibly can. Additionally, these regulations fund temporary accommodation through housing benefit, which has been widely called for and unanimously welcomed by local authorities.

These regulations follow on from a host of other changes that we have already implemented, including making our telephone lines Freephone numbers, extending the maximum repayment period for advances from six months to a year, increasing the maximum advance that claimants can receive to up to 100%, changing the guidance to ensure that, when private sector housing claimants come on to universal credit, we know whether their rent was previously paid directly to the landlord and can ensure that that continues.

[Clive Lewis (Norwich South) (Lab)]

Meaner even than the master in Oliver Twist’s workhouse, the Secretary of State seeks not just to stop the second helping, but to stop any meal at all. I ask her to come to Norfolk. If these changes go through, 12,500 children will be denied a hot midday meal. How does that square the circle in relation to making work pay? Please, can she tell us —anything?

[Ms McVey]

Unfortunately—I think that I was taught this as a child—when someone has totally lost the argument, they make up the facts, and that is what we are hearing from the Opposition. Although we have brought in all the requests that they wanted to support more people into work—I have just read out the list—they just scaremonger and make things up as they go along. I hope that it is clear to the whole House that these regulations will bring in real and tangible benefits for claimants and that, as promised, we are making the changes necessary to continue to deliver universal credit safely and securely, with all the necessary support that claimants need.

I want to be clear about another thing, too, because Members have stood up during past universal credit debates to recount stories of cases where their constituents have reported difficulties with universal credit. Where that has happened, we have immediately sought to address the concerns, because it is vital to us all that we get this right, so that we can deliver the most modern, forward-thinking, flexible benefit in the world, and that is what this Government are seeking to deliver. This benefit will be at the cutting edge of support throughout the world—that is what this Government are delivering.

Pension Equality for Women

Clive Lewis Excerpts

Thursday 14th December 2017 Commons Chamber

[Clive Lewis (Norwich South) (Lab)]

This is a fantastic debate. I pay tribute to my hon. Friend the Member for Easington (Grahame Morris) for the hard and tireless work he has done on this issue.

Many of us in this House, on both sides of the Chamber, do not see pensions as a burden but as an expression of collective solidarity among generations. We are proud of pensions—they are part of the glue of a civilised society and we will always defend them. That is why we defend and speak up for the WASPI women.

Like so many others in the Chamber today, I am here to represent many constituents who are among the millions of women—it sounds as though half of them are up in the Gallery today—who have suffered as a result of Government policy on pensions. The basic facts of this whole issue are now well-known. Many of the cases that Members will raise today will tell fundamentally the same story, but it is important that those stories be told. That is because the injustice of this consists not only in its quality—the sheer, brazen wrongness of it—but in its scale, with 3.8 million women being robbed of that which they were promised.

This is a huge scandal that must be faced up to by the Government as soon as possible. I have case studies of my own to tell—stories of constituents. Perhaps one of the most chilling and telling aspects is that I have been asked by my local 1950s women’s groups to anonymise them so as to not reveal their identities, because some of these women have been reduced to utter poverty and embarrassment. That is shocking. Women who have, in one way or another, spent their whole lives either working or caring for others—women in their 60s whose entire life plans were based on the knowledge that they would be receiving pensions in a given year—have been tossed casually on to the benefits system, with all its attendant humiliations. Some of my constituents have been forced to go out and get cleaning jobs on the minimum wage. Almost as bad as the financial robbery is the humiliation and insult. One woman is now forced to sell her home because she is unable to qualify for benefits—to sell the only asset she had acquired in a lifetime of work and service.

I have mentioned the quality of this injustice and its quantity—the numbers of those affected. However, there is another element that makes this scandal a terrible stain on all of us in this place—the perpetrator of the injustice. It has been carried out not by some faceless corporate financial mega-business domiciled in Panama, or by some fly-by-night wheeler-dealer, but by Her Majesty’s Government. I am chair of the APPG on fair business banking and finance. We have found in our work alarming evidence of malpractice and fraud in our financial sector that is truly disgraceful. We have also found that trust and faith in our financial sector are now shockingly low. But why should we be surprised by what is happening in the private sector if the Government themselves—the same Government who are supposed to regulate and keep the system fair—are so ready to casually rip off millions of women?

Trust, as we know, is hard won and easily lost. Yet without it, the entire basis of consent under which democratic government operates is lost. If we allow this injustice to persist, we will be doing our whole country a great disservice. I call on the Government to bring forward a fair and reasonable plan to solve this without delay.