Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021

Baroness Janke Excerpts

Monday 5th July 2021 Grand Committee

[Baroness Janke (LD) [V]]

My Lords, like the noble Lord, Lord Davies, I very much support this statutory instrument and welcome the measures that the regulations introduce. As has been said, the statutory instrument introduces new requirements for trustees of certain occupational pension schemes to make sure that these schemes are conducted with respect to the effects of climate change. Also, there is a requirement for reports to be published and powers given to the Pensions Regulator to ensure compliance.

These measures were widely supported during the passage of the pensions Bill; I echo the thanks of the noble Lord, Lord Davies, to the team who put so much work into them. They are much-awaited first steps, however, and we hope that they will have a far-reaching effect throughout the industry and the financial sector. Trustees and fund managers will need to become very knowledgeable about the financial risks of climate change and matters relating to it, and more particularly about the targets in the Paris Agreement. As a former trustee I must say that, for many, there will be a steep learning curve in being able to manage the requirements of these regulations. There is a reference to respondents who expressed concerns on the availability of data, key to climate change, in the notes on the consultation—the data will, of course, be important. The Minister said that there is plenty of data; there is, but the analysis of it will be demanding.

Trustees and fund managers will need a range of information to discharge these duties. What information will be made available about, for example, the eligibility of companies for investment? Has any progress been made about disclosure requirements on companies for current greenhouse gas emissions, and the projected impact of their business plans, assets and activities on future emission levels? Are there plans, for example, to create a register of low and zero-carbon investment opportunities at all levels of the investment chain, making it easier for everyone—from asset managers to pension fund managers and individuals—to understand the green options available and provide opportunities to promote and invest in innovation and creativity in green industry and commerce?

The finance sector needs to operate within a framework that steers resources into climate-friendly investments and away from climate-negative activities; for example, avoiding support for investments that may become stranded assets through activities such as opening new oil and gas fields or coal mines, which cannot operate in the long term and therefore will not deliver returns to investors if the net-zero target is to be met. This requires a series of actions by government and financial sector regulators, ensuring better flows of information about climate risks and green investment opportunities for investors, lenders, insurers and other stakeholders, while providing the impetus for the financial sector to play its part in driving the action that reflects risks and opportunities in combating climate change and creating a low-carbon economy. I look forward to the Minister’s response.