Pension Schemes: Guidance

Lord Davies of Brixton Excerpts

Monday 13th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Well, I will not be drawn on that by my noble friend, but the comments that she makes are broadly correct. It is very important that pension schemes, particularly those for purpose, encourage investments that align with the environment and society, and that includes climate change. I believe that the report, One Year On, outlines some pointers, insights or challenges. For example, most funds are using their investment consultants, while some are not yet using or including carbon offsets in their TCFD reports, but nothing in the findings so far is unfamiliar to DWP. We know there is work to do to improve the reports and build an element of expertise across the industries more generally.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome the report. The question is whether the advice can effectively come from the Government against the background—I hope the Minister will agree—that it is the members’ money that is intended to provide them with a retirement income and should be used in accordance with their wishes and views. Can the Minister confirm that that is his view of how money in pension funds should be used?

[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.