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

Matt Rodda Excerpts

Monday 5th July 2021 General Committees

[Matt Rodda (Reading East) (Lab)]

I would like to start by reflecting on the existential threat of climate change and the climate emergency. We are facing the most serious threat to humanity that we have ever seen. If allowed to carry on unchecked, the rate of temperature increase will dramatically change the world and will unleash a series of geological and environmental processes that will take us on an unsustainable trajectory to massive change to the climate.

So far, the Government’s response has been weak. The Prime Minister’s words have not been backed up by action on the scale that the emergency requires. The Government’s 10-point plan has failed to meet the scale of ambition needed. The Government are veering significantly off course to meet their legally binding 2050 net zero target. Quite simply, it is not good enough, yet it is all the more important in the year of COP26. The world is looking to the UK to show global leadership, but we must start at home if we are to do anything. We need credible action to increase the pace if we are to achieve the substantial majority of our emissions reductions by the end of this decade. That requires leadership, both at home and on the world stage.

A Labour Government will replace the Government’s piecemeal approach with a green new deal—a comprehensive plan for the transition to a low-carbon economy. Last week, after our questioning, it emerged that the Chancellor’s final report into the net zero review will be further delayed. The report was first due to be published in autumn 2020, and then in spring 2021. It has still not been published.

To show even further the scale of the slippage, last week the UK’s independent adviser on tackling climate change, the Climate Change Committee, which is headed by Lord Deben, a former Conservative Minister, revealed that the Treasury has not fully achieved a single one of the Committee’s 2020 recommendations. That is the context in which we are working.

I must move on to the scope for tackling climate change through pensions. It is worth noting—the Minister hinted at this—that it is a £1 trillion industry, with enormous potential to make real and lasting change and to protect us from the worst effects of climate change. Even on a tiny scale, a single pension has the ability—if invested properly—to take an amount of carbon out of the air equivalent to several cars being taken off the road. One individual person’s pension can make a difference. Imagine that scaled up across thousands or even millions of pensions. There is real potential to do some real good. The industry itself recognises that. The Path, a fund that advises on environmentally friendly investing, recently told the Financial Times that investing only a small amount in a more sustainable way could make a huge difference.

I want to reflect on the Pension Schemes Act and climate change, and putting those two parts together. When the Bill was introduced, instead of a net zero provision we saw no mention of net zero—a gaping hole that had to be dealt with on Second Reading. The Minister put a rather favourable gloss on that. The Government introduced amendments in Committee, which had to be strengthened through cross-party agreement and negotiation to ensure that trustees or managers had to take account of the Paris agreement and domestic targets such as net zero. Climate change was then mentioned for the first time in domestic pensions legislation. We should all be proud of that, but there is so much more to do.

I would like to stress that the Act could have gone a lot further. It could have been more ambitious but, sadly, the Government voted against the Labour amendment to allow regulators to mandate occupational schemes to develop an investment strategy aligned with net zero. Instead, we have this much less assertive statutory instrument in its place. Clearly, there remains a wide gap between the Government’s rhetoric and their actions on climate change, both in pensions and across a much wider field of policy.

Turning to the SI, I accept that it takes some steps forward. It sets out a duty on trustees and comes forward with a range of technical measures that are worthy in themselves. The SI has been consulted on and has wide-ranging support in the pensions industry and among stakeholders. However, many pensions firms and stakeholders want to go a lot further. To mention a few well-known names, Scottish Widows, Aviva, Nest, the BT pension scheme and some local government pension schemes have all signed up to Make My Money Matter, the green pensions charter that wishes to take things a lot further. It is clear that there is the will to do that among many players in the industry, who I have not been able to reference.

We have seen positive initiatives developed in other related sectors. I note, for example, that Mark Carney, the former Bank of England Governor, last week announced a taskforce on scaling voluntary carbon markets. I hope that colleagues will follow its progress and show the keen interest that it deserves.

Although the SI is worthy and necessary, I want to ask the Minister a series of questions that I hope he will respond to. First, does he really think that the Government are doing anywhere near enough to tackle climate change?

[Guy Opperman]

Yes.

[Matt Rodda]

I hope he will address that question more formally later. Secondly, what more can we do together on a cross-party basis to help the pensions sector tackle this enormous problem? Thirdly, will he write to me to set out the Government’s next steps? It is all well and good dealing with the regulations coming from the Act, but there is much more to do.

To sum up, the country, and indeed the world, faces an enormous challenge. Government policy is failing to address that and, as their own former Minister said only last week in the Climate Change Committee, the Government are seriously off track. The official Opposition have challenged and pressed for more action, some of which has been forthcoming. Today’s SI is helpful, but we need to see much more.