Pension Schemes Bill [Lords]

Debate between Anna McMorrin and Guy Opperman

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Monday 16th November 2020 Commons Chamber

[Anna McMorrin]

I rise primarily to speak in support of amendments 16 to 24.

The climate crisis remains one of the greatest challenges, if not the greatest challenge, that we face. We are rightly focused at the moment on dealing with the pandemic and the pressures that that entails, but we cannot afford to lose sight of the growing threat of climate breakdown and the risks it continues to pose.

We stand now at the crossroads between complacency and inaction, which locks us potentially into a future of climate chaos, and bold action that combines expertise and resource and can minimise climate risk, help build resilience and jobs for the future, and allow our society to emerge stronger and more equal. We need climate action to be embedded across all sectors of society, but particularly in finance.

No one is immune to the shifting seasons or the increasing severity and frequency of extreme weathers. Droughts or flooding that impact either one community or one continent will inevitably reverberate throughout the rest of the world, presenting issues of food insecurity and water shortages, and conflict or displacement. It is imperative that legislation going through this House is responsive to that climate crisis, and it must meet our international obligations, including those of the Paris climate agreement and our commitment to limit the global temperatures increase to 1.5° C.

It is crucial, therefore, that the £3 trillion locked into UK pensions today is mobilised to build that green recovery and meet that climate challenge, and to protect the future health of our people and planet and the prosperity that we all want to see and pass on to the next generation.

[Guy Opperman]

I am listening to the hon. Lady’s speech with great interest, and I am just wondering whether she is aware that the ESG—environmental, social and governance—regulations came into force only eight weeks ago and clause 124 specifically addresses the matters that she is outlining, and more particularly that we published in August specific action on tackling climate risk and improving the governance of occupational pension schemes. That is exactly what the consultation is all about.

[Anna McMorrin]

I thank the Minister for his intervention, but, frankly, it does not go far enough, which is why I am speaking to these amendments.

The previous speaker, the hon. Member for North Norfolk (Duncan Baker), is a member of the Environmental Audit Committee. I was a member of that Committee in the last Parliament, and there was an inquiry into greening finance, chaired by Mary Creagh. We found that the UK’s financial investment chain was structurally incentivised to prioritise short-term profits rather than long-term issues including the climate crisis. That needs to change. Long-term sustainability must be factored into financial decision making, and our report recommended mandatory climate risk reporting and a clarification in law that pension trustees have a duty to consider long-term sustainability, not just short-term returns.

We also emphasised in that report that enforcing those recommendations would push climate change further up boardroom agendas, where it is seriously lacking at the moment. We found through our inquiry that less than half of the 25 largest pension providers discussed climate risk at board level. Their pension schemes, including those of Aviva, Lloyds Bank and HBOS, were all considered to be less engaged than peers among the top 25, so I am particularly pleased to see that Aviva has been instrumental in supporting this amendment.

Disclosure is vital in driving awareness that pensions may be invested in fossil fuel projects, fast fashion, deforestation and extraction. Driving that awareness out there about where their money is going means that people can take control of their pension decisions and make informed choices. Pension funds risk seeing assets become worthless unless they wake up to the climate crisis. The former Governor of the Bank of England and current UN special envoy for climate action, Mark Carney, has said that we must

“align finance with society’s values…This will help deliver the world that our citizens demand and that future generations deserve.”

He said it could be

“the greatest commercial opportunity of our time.”

It is critical that the changes come into effect as early as possible, rather than just 2050 or sooner, if they are to correct the catastrophic trajectory of our climate. We must go further. Amendment 16 would make provision for current and future Governments to significantly strengthen the Bill through secondary legislation. We stand at the brink of climate chaos the likes of which we have yet to experience, but which unfortunately may become all too familiar. If we do not take the necessary action now, I am afraid that we will not get the future our children deserve to see.