Pension Schemes: Guidance
Debate between Viscount Younger of Leckie and Lord Teverson(1 year, 8 months ago)
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Viscount Younger of Leckie (Con)
I think it is important that the right advice is given. I start by saying that this is pretty ground-breaking, because the UK is the first country in the world to make occupational pension schemes consider, assess and report on the financial risks of climate change. In terms of what I would call “the push”, we have consulted with the pensions industry and certainly think it is right that guidance is given. For example, my department has introduced guidance alongside the TCFD requirements to help pension schemes understand how to identify, manage and assess climate-related risks and opportunities.
Lord Teverson (LD)
My Lords, actually, I think we were second after New Zealand; we were the first in the G20. The Financial Conduct Authority recently surveyed TCFD returns and found weaknesses in two areas: data or metrics, and targets. These are key areas. How will the Government try to put that right? Secondly, will the Government move forward, as I think they have said they will, with external assurance—in other words, audit—of those returns, to make sure that we banish greenwashing in this area?
Viscount Younger of Leckie (Con)
The noble Lord makes a good point. He has pointed out a few issues that were in the initial outlines. He mentioned data, which is an issue. Metrics and the use of implied temperature rises—for example, carbon offsetting and scenario planning—are definitely challenges that are being worked on domestically and internationally. As I said, we are the first country in the world to do this. It is good work, which needs to be built on.
Direct Tax and National Insurance Contributions
Debate between Viscount Younger of Leckie and Lord Teverson
Viscount Younger of Leckie (Con)
We are very aware of these sensitive matters. I alluded to what we are doing about these matters, including the non-dom status, earlier in response to a question from the noble Lord, Lord Tunnicliffe.
Lord Teverson (LD)
My Lords, could the Minister explain how we have become a high-tax but low-service-level—in terms of public services—economy? It is the worst of both worlds.
Viscount Younger of Leckie (Con)
As I alluded to earlier, the aim is to lower taxes, but we have a lot to contend with as a result of Putin’s appalling war in Ukraine and ongoing energy costs. At the end of the day, we aspire to be a low-tax country.
Teaching Excellence Framework
Debate between Viscount Younger of Leckie and Lord Teverson
Lord Teverson (LD)
My Lords, as someone who received a lower Second, could my degree be inflated to a double-starred First under this new system?
Viscount Younger of Leckie
One could assume that that was perhaps grade inflation but, hopefully, it would be due to grade improvement.
Nuclear Energy: Small Modular Reactor
Debate between Viscount Younger of Leckie and Lord Teverson
Viscount Younger of Leckie
We are aware of the interest in Wales as regards that particular siting. However, as I said earlier, a decision has not been made on where the sites might be. Perhaps I can reassure the noble Lord that as much as possible is being done to look at the early rolling-out of the SMRs, but it is a complex matter.
Lord Teverson (LD)
My Lords, I welcome Rolls-Royce’s great expertise in this area, but as the term “modular” suggests, the only way in which these reactors can become commercially economic is if they roll off a production line, which it is estimated requires some 50 to 60 reactors to be produced over a lifetime. Is that not wildly optimistic? Surely it will never happen, certainly given changes and developments in other technologies in the energy field.
Viscount Younger of Leckie
The noble Lord alludes to the different types of reactor. We are not necessarily looking at one small modular reactor; it is much more complicated than that. Some micro-reactors might be helpful, for example, in introducing the SMRs into districts to help with heating for multiple schools and so on. The claimed advantages for SMRs include easier-to-finance projects with lower up-front capital costs. They are smaller projects which are quicker to build. There is a lower construction risk and a greater deal of efficiency in their manufacture. So there are advantages, but there is more work to be done.
Bombardier
Debate between Viscount Younger of Leckie and Lord Teverson
Viscount Younger of Leckie
I will have to write to my noble friend about that specific point, as it is not in my brief. I will certainly write and give her a full briefing on that.
Lord Teverson (LD)
My Lords, I very much welcome the Government’s strong approach, but it is very optimistic to say that this is a ring-fenced issue. If the Government are speaking to the United States Administration, will they also raise the matter of the American challenge to tariff-rate quotas and the breaking-up of the agreement that has been made between the UK and Europe over tariff-rate quotas on agricultural agreements? This too could be very detrimental to this country in our Brexit negotiations, but is something that the United States Government have taken to the WTO quite aggressively.
Energy Bill [HL]
Debate between Viscount Younger of Leckie and Lord Teverson(8 years, 7 months ago)
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Lord Teverson
My Lords, I thank the Minister for giving way and I do not wish to take up the time of the House, but I interrupt because it is not reasonable—
Viscount Younger of Leckie
I am sorry to interrupt the noble Lord but he may need to be reminded that, at this stage of the Bill, only one speech is permitted.
Lord Teverson
I am sorry, but I do not think it is right procedurally for the Minister to say that he has had a private conversation with another Member of the House or that that is a sufficient answer when the rest of the House is not privy to that conversation. That is not reasonable.
Enterprise and Regulatory Reform Bill
Debate between Viscount Younger of Leckie and Lord Teverson(11 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, I welcome the contributions from my noble friend Lord Teverson and the noble Baroness, Lady Worthington, to this debate, and indeed the cross-party support that there is for the UK Green Investment Bank. The bank will be a key driver of the transition to a green economy and is already making investments in green infrastructure projects. The bank has already committed more than £400 million to projects across a range of sectors, including waste, non-domestic energy efficiency and offshore wind. These investments are illustrative of the impact we expect the bank to have in the coming years.
In turning to the first amendment, I emphasise the large measure of agreement between the Government and noble Lords who have tabled this amendment. We agree that the reduction of greenhouse gas emissions is a key objective for the bank and accept that it would be right to give this objective statutory recognition. However, we want to do this in a way that best reflects the bank’s corporate governance framework and its position as a Companies Act company. Clause 1 sets out five statutory green purposes which, read together, set the parameters of the bank’s activity to ensure that it must always remain green. These green purposes provide an overarching framework for the bank’s green activity while preserving the necessary breadth to adapt to evolving green priorities over the long term. The Government consider that this breadth is essential as there are important activities which are clearly “green”, but may not reduce greenhouse gas emissions, including recycling and improving water quality. We would not want the Bill to be amended in such a way that put doubt on the bank’s ability to invest in these areas, and I welcome noble Lords’ support for this approach.
As I have said, the Government agree that the reduction of greenhouse gas emissions is an important objective for the bank. That is why we have included a statutory green purpose explicitly to this effect, and why we have tabled our own amendments, to which I will turn shortly. However, it is important that we focus on the key objectives for the bank and do not introduce additional requirements that might complicate its decision-making process. We need to ensure that under its constitution, the Bank can operate as a commercial company. This is important because the bank’s impact may be diluted if the board is concerned that the Government or the courts may seek to second-guess its commercial judgments. That is why the Secretary of State has given an operational independence undertaking to the board.
It is equally important that the legislation provides sufficient clarity for the board and does not expose its investment decisions to increased risk of challenge by bringing a clear public element to the Bank’s functions. Furthermore, by adding another test on which the board will have to be satisfied when making investment decisions, this amendment raises the prospect of the legislative framework conflicting with the bank’s own constitution, something we believe is avoided through the Government’s proposed amendments to the Bill.
At the same time, we do not believe that our ambition in this area is any less than that of noble Lords. The Government’s amendments do not refer to a significant reduction in greenhouse gas emissions because we do not believe that it would be possible to give sufficient clarity to the bank’s directors if we were to introduce such imprecise wording. Indeed Amendment 1 would not require the board to make a significant reduction to greenhouse gas emissions. The Government’s preferred approach of making the new obligation part of the company’s objects would, however, give the bank’s directors strong encouragement to maximise the reduction of greenhouse gas emissions, as that would be the most likely way to maximise the success of the company.
The noble Lord, Lord Smith of Kelvin, who is chairman of the UK Green Investment Bank, has said that he supports this approach, and I welcome his letter, which I received a couple of days ago. The noble Lord has been very clear that he welcomes a statutory obligation on the bank in respect of the reduction of greenhouse gas emissions, but has said that it is important that this is achieved in a way that is consistent with the bank’s internal constitution and with the directors’ general duties to the company.
We also agree with noble Lords that it is important that the bank contributes to a reduction in UK greenhouse gas emissions. As this Bill must make provision for the long-term future of the bank, we believe that the best approach would be to achieve this through an amendment to the company’s objects and we intend to make such an amendment shortly. Amendment of the objects after designation will of course require the affirmative resolution of both Houses of Parliament.
Finally, I will comment on two further aspects of this amendment. Amendment 1 would require the board to have regard to the advice and reports of the Committee on Climate Change. I am happy to give a commitment on behalf of the noble Lord, Lord Smith of Kelvin, and the other members of the bank’s board that they will do so. We would, however, much prefer not to impose a specific statutory obligation on the board which might cast doubt on the breadth of the general duty on all directors—under Section 172 of the Companies Act 2006—to have regard to the impact of the company’s operations on the environment.
Secondly this amendment, unlike the Government’s amendments, does not impose a corresponding disclosure requirement on the board. We believe it is important that there is a tailored disclosure obligation on the board in respect of this new requirement to ensure full transparency and accountability. This approach is of course in keeping with the best standards of corporate governance.
I will now turn in more detail to the Government’s own amendments in this area. Amendment 3 requires the Secretary of State to be satisfied that the bank’s objects are such that, in acting consistently with them, the bank’s investment activities—taken as a whole—would be such as the bank considers likely to contribute to a reduction of global greenhouse gas emissions. The new obligation on the board is therefore imposed through the company’s statement of objects in its articles of association. This reflects the approach we have taken in respect of the green purposes and ensures that the new obligation forms part of the directors’ general duties to the company, including the duty to promote the success of the company in line with its objects. We believe that this will be the most effective approach. It also eliminates the possibility of inconsistency with the company’s corporate governance framework and reduces the risk of legal challenge to the board’s investment decisions.
The new provision goes significantly beyond the assurances we have already given in this area and ensures that the bank will continue to focus its investments in areas that will deliver such reductions. As I have said, the noble Lord, Lord Smith of Kelvin, has indicated his support for the Government’s approach.
Amendment 8 would prevent any alteration to the bank’s objects which is not consistent with the requirement for the bank’s investment activities as a whole to deliver a reduction in greenhouse gas emissions. This will ensure that this new obligation will continue to apply even if there were to be a change in the company’s ownership.
The third substantive element is the imposition of a bespoke reporting requirement in respect of the new obligation on the directors to ensure that the bank’s overall investment portfolio reduces greenhouse gas emissions. Previous debates have touched on the bank’s commitment to transparency, and the bank’s board has already agreed that the bank will voluntarily report on the greenhouse gas impacts of its investments. This new reporting requirement will complement that commitment by requiring the bank’s directors to include in their directors’ report an explanation of the steps that they have taken to ensure that the bank’s investment activities would be likely to contribute to a reduction of global greenhouse gas emissions, together with a statement of their views on the likely effect of the bank’s activities on global greenhouse gas emissions. In addition, the bank will be required to report on the greenhouse gas emissions associated with its own activities under the forthcoming changes to the narrative reporting requirements on quoted companies.
Finally, turning to Amendments 4, 9 and 12, the Government strongly believe that any new obligations in this area should be imposed through the company’s constitution rather than through a separate public law requirement, which might not be wholly consistent with the directors’ duties under the company’s constitution. The amendments tabled by the noble Baroness, Lady Worthington, seek to combine the two approaches by imposing an obligation in respect of an Act of Parliament through the company’s constitution. The Government consider that this approach will not deliver the degree of clarity that is needed.
The Climate Change Act 2008 imposes obligations on the Government, not on the UK Green Investment Bank—there is a difference. Reference to this Act in the company’s constitution cannot therefore provide the clarity that the bank’s directors need for effective decision-making. At the same time, I do not believe that these amendments show greater ambition than the Government’s approach.
The Government are proposing that, under the bank’s constitution, the directors will have a general duty to ensure that the bank’s investment activities, taken as a whole, contribute to a reduction of greenhouse gas emissions, both globally and in the United Kingdom. This is not a stand-alone duty but must be read alongside the directors’ general duty to act in the way that they consider would be most likely to promote the success of the company, using the definition of success set out in the company’s objects. The directors would fail in this duty if they were to aim for a very small net reduction in greenhouse gas emissions even if, acting consistently with their other duties, they could achieve a much more significant reduction. We therefore do not believe that an additional obligation linked to Climate Change Act targets would in practice affect the board’s decision-making or the scope of its ambitions in this area.
In conclusion, we agree that the reduction of greenhouse gases will be a key objective for the bank but we wish to ensure that statutory intervention on this point reflects the bank’s position as a Companies Act company and its corporate governance framework. We believe that the Government’s amendments, which will create a requirement through the objects for the bank’s investment portfolio to deliver a carbon reduction and set out in statute the reporting mechanisms that sit behind this requirement, will address noble Lords’ concerns in the way that best reflects the bank’s corporate governance. I therefore ask my noble friend Lord Teverson to withdraw his amendment.
Lord Teverson
My Lords, I thank my noble friend the Minister for his explanation of the government amendments and how they relate to the others. I have to admit that bits of them are certainly better than my own amendment. I welcome very strongly the undertaking from the Dispatch Box that there will be regular reports from the board to the Committee on Climate Change. I also welcome the extra disclosures and the fact that alterations to the company’s objectives have to comply with reducing carbon emissions as well, which is an important point.
I have been trying to understand what difference would be made by the addition of the reference to the Climate Change Act proposed by the noble Baroness, Lady Worthington. I like the reference to the Climate Change Act but it is difficult to see, if you are reducing carbon emissions—which is part of the overall objective of the Green Investment Bank—how you would then not be closer to complying with carbon budgets and those requirements.
I am happy with the Government’s response. I thank the Minister for having responded in that way and for making those commitments at the Dispatch Box. I beg leave to withdraw my amendment.
Viscount Younger of Leckie
I thank the noble Lord for his intervention. However, it would put the opportunity to borrow in the Bill, and we do not believe that this is the right thing to do at this stage given that the Green Investment Bank is just starting up. As I said, it needs to be able to walk before it can run.
Lord Teverson
My Lords, I thank the Minister for going through that. I understand entirely the issues around public sector borrowing, commitments and national debt and all the areas that are key parts of the coalition’s programme for government. I understand what the Minister is saying about there being a way forward after this time, and welcome the fact that the Government will keep this under review and that it will start to be looked at in some of the future budget forecasting. On that basis, I will give him the benefit of the doubt. It is not an especially strong response to something that is genuinely needed, but I accept the good will of the Government and I beg leave to withdraw the amendment.