(5 years, 7 months ago)
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It is a pleasure to serve under your chairmanship, Mr Howarth. I thank the right hon. Member for Kingston and Surbiton (Sir Edward Davey) for securing this vital debate. I also thank the nine Members who made speeches, as well as those who intervened.
It is not every day that I agree with the Liberal Democrats, but we certainly have common ground on this issue. We are in a climate emergency, and when we talk about moving towards a greener economy, we must be clear that the time for debate and discussion alone has passed. It is now time for clear, concrete and urgent action. As my hon. Friend the Member for Dulwich and West Norwood (Helen Hayes) so powerfully argued, we must make no mistake: this is a climate emergency; this is a crisis.
One could argue that climate change has never been so prominent in public consciousness and political discourse. Despite the Brexit-related dramas in Parliament, which still continue, between 15 and 25 April, climate change was high on the news agenda in response to Extinction Rebellion protests in London, a major BBC documentary presented by Sir David Attenborough, and the visit to London of a Swedish schoolgirl. They led the way for many of us.
Over the past 12 months, according to pollsters, the environment has risen in public concern. In a YouGov poll conducted on 29 and 30 April, 24% of people placed the environment among the top issues facing the country—about the same level as concern about the economy and immigration. That is a stunning development. We know from our postbags the levels of concern among the public about the climate emergency. Nothing short of a major transformation from fossil fuels to renewables will be good enough. Changing the ways that pension funds invest will not solve the crisis on its own; it must be part of a much wider approach—a new green deal, or a green industrial revolution. We have made some progress but, my God, we need to make considerably more if we are genuinely to tackle this emergency.
My hon. Friend the Member for Warwick and Leamington (Matt Western) highlighted the fact that the Labour-led Southwark Council has moved £450 million into passive funds that track low-carbon and fossil-free indices. It has also invested £30 million in Glennmont’s green energy fund, which invests in western European wind and solar companies. Many trade unions—I declare an interest as a member of Unison—have produced excellent and accessible guides to divesting away from fossil fuels, and I know that has been welcomed by representatives on local government pension committees and schemes up and down the country.
Parliament has started to take this issue more seriously and put its own House in order. In June last year, 11 hon. Members, including the shadow Chancellor, called for Cambridge University to remove its £377 million fossil fuel investments. In addition, 244 serving and former MPs have signed the Divest Parliament pledge, calling on the trustees to phase out investments in fossil fuel companies. The trustees are developing a climate change investment policy, but not quickly enough, as highlighted powerfully by my hon. Friend the Member for Bristol West (Thangam Debbonaire). We want that policy to commit to phasing out investment in fossil fuel companies in the earliest timeframe possible and to reinvest the money in funds aligned to the Paris agreement.
This country’s pension assets, as highlighted by my hon. Friend the Member for Warwick and Leamington, total some £2.8 trillion. Pension savings should be at the forefront of the fight against climate change. Pension savers have money invested for the long term, so it is particularly exposed to climate risks, as powerfully argued right across the Chamber. This concern is now relevant to more of us than ever.
Given the clear threat that climate change poses, we would all hope that it would be the norm for pension schemes to manage the risks. Unfortunately, research from the charity ShareAction finds that, for many, their retirement savings are unlikely to be sufficiently protected against climate risks. In a survey of some of the UK’s largest defined-contribution corporate pension schemes, just two of the 15 participating schemes had changed their default investment strategy specifically to reduce the exposure of employees’ savings to climate change risks. Although ShareAction found that a handful of schemes are considering further policy developments in this respect, the fact that a gulf exists in the strategies of schemes means that workers face a lottery from one job to the next as to whether their savings are sufficiently protected against climate change.
As the Minister stated in an intervention, the new pensions investment regulations, in force from October 2019 and to be strengthened in 2020, go some way towards addressing the issue. Scheme trustees will need to update policies to show how they take climate change into consideration as a financial risk. However, as my hon. Friends the Members for Norwich South (Clive Lewis) and for Southampton, Test (Dr Whitehead) argued powerfully, we need to go considerably further.
Financial regulators have a major part to play. Trustees in charge of managing schemes need enhanced guidance from the Pensions Regulator on how best to manage climate risks. The Financial Conduct Authority, in charge of regulating contract-based schemes, needs to provide clarity on the need for consideration of and reporting on climate risks, through both investment and stewardship, to ensure that no savers face weaker protections because of the scheme in which their employer happens to have enrolled them.
Greater transparency about the actions that schemes are taking to manage the risks should result in better decisions being made.
The hon. Gentleman is making a very good point about transparency. A large reform is going on in the audit industry at the moment. Does he agree that there is an opportunity for us to look at the whole of financial services and financial infrastructure and look at how we value investments, so that we value intangibles along with tangibles and ensure that our environmental and sustainability investments are getting their appropriate value? This is not just a trade-off between short-term returns and long-term investments; we can achieve both if they are valued correctly.
That is a very good point, which I will come on to.
Pension schemes should be required to report on their management of climate risks in line with the Task Force on Climate-related Financial Disclosures. Transparency could also be enhanced by mandating scheme member representation—I think that my hon. Friend the Member for Leeds North West (Alex Sobel) argued for this—on the governance boards of the new auto-enrolment schemes, as well as by requiring pension schemes to consult their members on key policies.
We need to send clear signals that tackling climate change and other environmental, social and governance risks is not distinct from the core purpose of financial markets, but an integral part of it, as the hon. Member for Ochil and South Perthshire (Luke Graham) argued in his intervention. Of course, as we divest from fossil fuels, we must ramp up investment in clean and green technology. Labour has set out plans to fit 1.75 million homes with electricity-generating solar photovoltaic panels, creating thousands of quality skilled jobs across the UK. That is a Labour green deal that will shift energy generation via renewables to 85% by 2030. It will provide a major boost to an industry that is still recovering from the effects of the coalition Government’s ill thought out slashing of feed-in tariffs, which was such a blow to a growing and vital industry.