Pension Schemes Bill [Lords]

Ben Lake Excerpts

2nd reading & 2nd reading: House of Commons & Money resolution & Money resolution: House of Commons & Programme motion & Programme motion: House of Commons
Wednesday 7th October 2020 Commons Chamber

[Ben Lake (Ceredigion) (PC)]

Diolch, Mr Deputy Speaker, for calling me to contribute to this very important debate, which I think has revealed quite a refreshing amount of consensus on both sides of the House. It is a pleasure to follow the hon. Member for Runnymede and Weybridge (Dr Spencer). I agree with many of the points he made in relation to the measures in clause 125.

The Bill represents a welcome step to ensuring the security and responsible use of UK pension schemes. I particularly welcome clause 124, which addresses the vital issue of climate change: the risk it represents to our long-term socioeconomic security and the role pension funds can play as key levers in the decarbonisation effort of our economy. Wales has a proud record on sustainability and climate change mitigation. A commitment to sustainable development is written into our de facto constitution and we were a world leader with our Well-Being of Future Generations (Wales) Act 2015. I know the Minister is aware of the groundbreaking work undertaken at the Centre for Alternative Technology, which is located in the constituency of the hon. Member for Montgomeryshire (Craig Williams). There is also groundbreaking work undertaken on my side of the Dyfi estuary. In particular, Aberystwyth University boasts the world-leading Centre for Glaciology, while IBERS—the Institute of Biological, Environmental and Rural Sciences—and Aberinnovation campus conduct crucial work into climate change mitigation.

[Guy Opperman]

I am grateful to the hon. Gentleman for putting on the record my knowledge of mid-Wales and support for so much of what is taking place there. I would be delighted to join him and visit the two institutions in his constituency and in that of his neighbour, my hon. Friend the Member for Montgomeryshire (Craig Williams), when we are allowed to do visits in future.

[Ben Lake]

That is a very kind offer from the Minister and I will take him up on it.

Achieving net zero emissions will undoubtedly be a difficult and expensive challenge, yet, as the past few months have shown, the state, with its unrivalled ability to borrow and invest, can effect unprecedented change to our society and economy quite rapidly when there is a desire or need to do so. With around £3 trillion invested in UK pension schemes, pensions represent an equally transformative source of investment and could support our decarbonisation efforts.

I welcome the requirements in the Bill for pension schemes to assess their exposure to climate change risk. Those requirements are necessary and well overdue. The Economist Intelligence Unit’s estimate that climate change could eliminate up to 30% of the world’s total manageable assets, along with the fact that the vast majority of UK pension schemes currently do not take climate change risk into account, offer sufficient justification for the introduction of the requirements.

Closer to home, in 2019 Welsh local authority pension funds still had more than £1 billion invested in fossil fuels. That means not only that the pension holders are exposed to future climate change risk, but that the funds are—indirectly at least—undermining collective efforts to decarbonise the economy. I therefore urge the UK Government to consider how they can better work with the Welsh Government to encourage the use of pension wealth to realise decarbonisation and productivity improvements across the four nations of the United Kingdom.

The opportunities are there. In recent years, vital projects such as the Swansea Bay tidal lagoon have gone unrealised, while the UK Government have proven themselves unwilling to finance key aspects of our carbon transition in Wales, including improvements to the Welsh railways. Simply put, we have an opportunity to make pensions work better for Wales, to achieve our climate targets and to meet our international commitments.

I welcome the Bill’s increased powers for the pension regulator and the greater urgency for funds to consider climate change risk, but the Bill could go one step further. The finance sector has already taken welcome steps not only towards divestment but in advancing the environmental, social, and corporate governance agenda. The UK Government could bolster those efforts by amending the Bill so that all default funds are required to reach net zero by 2050, at the latest. That would stimulate green investment, as well as industry development, including better reporting standards and stewardship, as mentioned by the hon. Member for Amber Valley (Nigel Mills) earlier.

Pension funds have a pivotal role to play in decarbonisation—from influencing companies’ boardrooms to invest in a green transition, to protecting pension holders from the risk of climate change. For too long, their transformative potential as investors in that regard has been underutilised, so I welcome the Bill, and particularly clause 124, and hope that the Government can consider strengthening it further so that pension schemes play an even greater part in achieving our vital climate change targets.