Pension Schemes Bill

Lord Pitt-Watson Excerpts

Monday 23rd February 2026 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will speak in favour of all the amendments in this group, particularly Amendment 212, to which I have attached my name. As has already been widely noted, it has broad, cross-party support. I would have attached my name to Amendment 218A had there been space and to Amendment 218E had I caught up with it; I will certainly talk to the noble Baroness, Lady Coffey, should she be thinking about bringing it back on Report, having at Second Reading praised the noble Baroness’s contributions in that direction.

Like that of the noble Baroness, Lady Hayman, my speech at Second Reading majored on the fiduciary duty issues, which this group very much gets to the heart of. I was very interested in the comments made by the noble Baroness, Lady Penn, on the TNFD. It is great to hear such broad political support for that; I hope that it is something we can take forward.

I will mostly focus on Amendment 212. Noble Lords might expect me, as the Green, to get up and talk about the climate emergency—that is standard—but what I am really getting up to talk about today is financial risk. I am talking about the carbon bubble, which is a very severe risk, among many other risks, that all pension savers face. There is a strong economic case for green pensions reform. UK pension schemes have been estimated to hold at least £88 billion in fossil fuel companies and £10 billion in thermal coal alone. Here, I will drop in statistics relating to the biodiversity point: UK pension schemes hold £300 billion in companies linked to deforestation, more than 85% of leading schemes have been found to lack credible climate action plans, and only 4% of pension assets are invested in climate solutions, the things that could be providing the long-term future.

One of the issues that this amendment brings forward is the fact that there is a lack of monitoring of this situation by both the Government and the Pensions Regulator. There were a number of Written Questions in the other place in September about the risks of stranded assets, contribution to fossil fuels expansion and investments in fossil fuels. The Government’s response was that they did not have any estimates on these matters. Subsequent Written Questions led to the understanding that the Pensions Regulator also has no estimates on these matters. There is already some data on this, which is being captured by independent organisations—but I am afraid that is really not good enough. The carbon bubble is something the Government really need to have a handle on.

As some other speakers have already said, we know that many of the largest pension schemes, including some of the biggest names, continue to be invested in thermal coal, as well as other very marginal fossil fuel extraction, which will swiftly become uneconomic as global demand tails off. That is already happening with thermal coal. The International Energy Agency’s Electricity 2026 report, out earlier this month, suggested that global demand for coal has already peaked. China and India, as well as Europe, all saw declines in 2025, yet these investments are still happening.

It is common for the idea to be floated that pension schemes should not exit these investments, despite holding them solely for short-term benefit and for the ruination of other holdings in pension savers’ portfolios, but should try to engage in the companies concerned. However, this has not had any discernible impact. After decades of so-called engagement, no coal mining firm has set strong decarbonisation targets, and it is very hard to see how they might actually do so.

Many oil and gas firms are nominally signed up to far away 2050 targets. I am sure we have all heard the phrase that having a 2050 target is the same as having no target at all. Barely any have anything like a fast enough transition to come anything close to being Paris-aligned. We saw with BP and Shell how quickly firms row back from hard-won targets when their CEOs change or a few shareholders start to grumble. What we are talking about here, I stress, is an approach to protect pension savers’ financial interests. When the UK Government’s policy is moving towards decarbonising the economy, UK pension policy should not be undermining that, particularly when it comes to thermal coal overseas.

[Lord Pitt-Watson (Lab)]

My Lords, in contributing here, I should say my background is in responsible investment, with Hermes Fund Managers. It still on occasion offers me an office, from time to time. Since this is about responsible investment, as you can imagine, I could not more strongly support the principles of what we are debating here if I tried. I also absolutely welcome the cross-party nature of this: my noble friend Lady Griffin speaks from a trade union representing beneficiaries of pension funds. However, I am just not sure that these three amendments get us where it is that we want to get to.

To start with the trustee issue raised by Amendment 218A, of course trustees should take into account systemic issues in their investment and stewardship, and they should do so in the interests of the economic, environmental and social interests of their beneficiaries. We make a mistake if we separate those interests because they go together. If we want evidence of the significance of that, we might look at research from Columbia University suggesting that 85% of the return you get from your pension fund will be systemic and only 15% will be from idiosyncratic things that your fund managers have done.

Pension Schemes Bill

Lord Pitt-Watson Excerpts

Committee stage
Thursday 5th February 2026 Grand Committee

[Lord Pitt-Watson (Lab)]

My Lords, I rise nervously since it has been only one week since I made my maiden speech. I should declare an interest, as I have worked in the field of responsible investment for the past 25 years; I am not paid for any action there but, on occasion, my old employer allows me to use an office in the City when I have a meeting there.

I want to make two observations. One is about this Committee, which I have been sitting in on over the past few days, and one is more about this debate.

My observation on the Committee is that I am so impressed by the standard of the questioning. I am also extraordinarily impressed by the magisterial answers that can be given in pulling together what is a really complicated pensions Bill, much of which I admit not to understand. I have noted that, in our discussions and debates, there is often a great unity of purpose in terms of where we want to get to, but also some questions around how we might want to get there.

With that in mind, I want to address the issues that we are discussing today. I think that where I want to get to is very similar to the places the proposers of these amendments want to get to, but I might caution them a little to think about the ecosystem for which we are writing rules. If you look at a big UK pension fund, its equity portfolio is probably index-tracked, so it is buying entire markets rather than individual companies. It probably holds stakes in 5,000 different companies, or something like that, so we need to think practically about how we are influencing it.

We also have a situation—I find this extraordinary; I know that both the Government and the Committee are concerned about this—where an average British pension fund might have more equity investments in Nvidia and Apple than in the entire UK stock market because of the way in which assets are allocated. The UK pensions system is, therefore, a very small holder in a very large number of companies. I profoundly agree that we need to uphold international law on human rights, but, if we are to do that, do we not need to think about how we can get everyone to work together on that, rather than just a small proportion that might ultimately divest?

I note that Principles for Responsible Investment, which has $130 trillion of assets under management, has promised to be active owners and to incorporate social and environmental issues into its investment and ownership practices. Might there be some way in which we can hold those promises to account? Also, when thinking about how we can address human rights issues such as modern slavery—we have talked to companies about this—the campaigners often tell us, “Don’t have the companies ticking boxes saying that they know nothing about modern slavery. It is everywhere, and we need to be fighting it everywhere. Let us be open about how we do this”.

One initiative that I support, both in an advisory role and financially, is the Business and Human Rights Resource Centre, a network that investigates 1,500 human rights abuses by companies all around the world. It goes back to the companies and says, “You’ve got to fix this”. I have been particularly keen that, if the company does not fix it, the network can then see their shareholders and make sure, at the next shareholder meeting, that those questions are being raised with the companies. I wonder whether that is something we could leverage.

Recognising how difficult this is, I led the finance initiative to persuade British companies to divest from Myanmar 15 years ago, just before Aung San Suu Kyi took over. Of course, things have gone backwards since then. I was at a party before Christmas where someone remonstrated with me about what a terrible decision it was for British companies to withdraw from Myanmar. This is quite complicated stuff. How do we build on what is already there?

I love the passionate support for new asset classes, because it is so important that we move them forward. What we want to do is to get money flowing to social causes. I am not quite sure that there is always one solution. I was very involved in the development of the green bond market, which reached a $1 trillion issuance last year—that is pretty good. We also have to think about the traditional ways we can get this. Housing associations borrow on normal markets, so how do we get more of that? We have Bridges and the LGPS, which the noble Baroness talked about. I wonder whether we should always want things to be pension specific—although I do know that this is a pensions Bill, so perhaps that is part of it.

Then there is the question of knowing the social impact. We need to be careful about what social impact is. I am struck that, if you were to set up a pension system, a lending system or even a saving system in the developing world, you would be praised for the massive social impact you would make. Similarly, Henry Duncan’s trustee savings bank—he was Scottish, like me, as were Wallace and Webster, who set up the first pension fund—had a huge social impact. As we think about the social impact of the pensions and finance industry, I note that both in terms of its liability—what it is giving the public for their savings—and the assets it is holding on their behalf, the industry is thinking about both sides of that social impact.

Going back what I said earlier, I hear quite a lot of consensus about where we want to get to. Whatever happens to these particular clauses, I wonder whether we could work together on this issue—it is a very big one—in the future in some way. Britain is an absolute leader in responsible investment. If we can listen to beneficiaries, talk to sponsors and gather the industry—and if the Government can help set the framework—we can do something that would be really worth while.

[Baroness Altmann (Non-Afl)]

I will speak very briefly to support the amendment tabled by the noble Baroness, Lady Stedman-Scott, and the noble Viscount, Lord Younger. I know how passionate the noble Baroness is about the issue of social impact bonds, so it seems to me that this is a very modest and well-constructed amendment that could have significantly positive impacts on growth and local amenities. It would also specifically say, after Clause 117:

“Nothing in this section … requires trustees to invest in social bonds or any other asset class”.


So it does not in any way require this to happen, but it seeks to facilitate a system set up for pension funds to invest in this way in assets that, potentially, would have a significant social benefit, of which the noble Baroness spoke so passionately, having seen the positive results.