Pension Funds: Financial and Ethical Investments

George Howarth Excerpts

Wednesday 22nd May 2019 Westminster Hall

[Several hon. Members rose—]

[Mr George Howarth (in the Chair)]

Order. Before I call the next speaker, in view of the importance that people rightly attach to this issue, a large number of people want to speak. Accordingly, I will have to impose a time limit on speeches of five minutes. I may have to reduce that later.

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[Mr George Howarth (in the Chair)]

Order. I am sorry; the hon. Gentleman has exceeded his time limit.

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[David Warburton (Somerton and Frome) (Con)]

It is a pleasure to serve under your chairmanship, Mr Howarth. I join others in congratulating the right hon. Member for Kingston and Surbiton (Sir Edward Davey) for his efforts to bring this important debate to the House. I found his five points interesting and inviting.

The question we are looking at today might seem divorced from the emergency that Parliament has rightly declared in respect of climate change, but in fact it cuts to the heart of the issue. There is a causal and consequential link between finance and the environment, as we have heard, as well as environmental implications of investment strategy and supply chains.

As Members will be aware, article 2 of the Paris agreement states the need to make

“finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”

The fact that it is not merely ethically and environmentally better but more financially prudent to move away from fossil fuel investments is a welcome sign that the systemic change we need is slowly coming together. Along with an ever-growing number of MPs from all parties, I signed and fully support the Divest Parliament pledge. Parliament must lead the way, lead the debate, lead by example and lead by action.

If we are to achieve a net zero target before 2050, we require not only political will but the active support of all sectors of society. The low-carbon sector and its supply chain now provide nearly 400,000 green-collar jobs in the UK—more than aerospace—and are growing considerably faster than our main economy, with estimated potential exports of more than £60 billion by 2030. Lord Deben, chair of the Committee on Climate Change, said that the CCC had been deliberately cautious in drawing up its 2050 target and had deliberately excluded the impact of technological innovations, as we heard earlier, which could hasten the UK’s progress towards a net zero target in ways that cannot currently be anticipated. So our progress in meeting our environmental targets directly depends on the prosperity of our green economy.

We know that the personal is increasingly becoming the political, and vice versa. Few things would more erode the channels of communication between Parliament and the public than our asking one thing of them while tacitly endorsing something else ourselves. We cannot just talk the talk; we also have to walk the walk. If we are to work alongside our constituents and harness their energy in eliminating net UK emissions, it is vital that we divest the parliamentary pension fund of fossil fuel investments. I therefore welcome the recent pledge by the fund trustees to

“prepare a climate change policy”

and to “show ambition” in formulating a responsible business plan that is in line with the principles being discussed today. As we have heard, this is not just about the parliamentary fund but about the broader symbolic implications of such a step.

The Governor of the Bank of England and the Environmental Audit Committee have publicly warned of the dangers of over-exposure to carbon assets in the light of the international drive towards net zero. Hon. Members will be familiar with the 2006 Stern review and the pivotal role it has played in shaping understanding of the interaction between climate change and the economy. Lord Stern recently suggested that the economic models under which current projections are produced systematically underestimate the economic implications of climate change and its effects. A study published last year by the co-director of the Oxford University climate econometrics project describes the catastrophic economic consequences of a 2° C jump in the global temperature, and how, beyond that headline figure, the poorest countries will suffer the direst economic effects.

Since the introduction of auto-enrolment in 2012, the percentage of UK workers in a pension scheme has mushroomed. Ignoring the effects of investment strategies really is disastrous short-termism. The parliamentary fund needs to demonstrate the beautiful truth that long-term measures to mitigate climate change and long-term investment strategies are not incompatible—far from it. In fact, they can form a fabulous virtuous circle, and one that I hope will be beneficial to us all.

[Mr George Howarth (in the Chair)]

Order. To give people time to adjust their speeches, I say now that I will reduce the time limit to four minutes after the next speech.

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[Several hon. Members rose—]

[Mr George Howarth (in the Chair)]

Order. To get the three remaining speakers in and leave enough time for the Front Benchers, and a moment of two at the end for the right hon. Member for Kingston and Surbiton (Sir Edward Davey), I shall have to reduce the time limit further to three minutes.