Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what plans he has to implement the recommendations of the Law Commission on clarifying the duties of pension providers in respect of long-term investment factors.

We want pension schemes to take account of all financial long-term risks when making investment decisions, and we therefore welcome the Law Commission’s report.

We are concerned that some investment decisions may be made with short-term considerations in mind. This can exclude consideration of options that take account of longer term financial factors, such as those arising from material environmental, social and governance (ESG) risks.

We are concerned that some investment decisions may not appropriately take into account longer term financial factors, such as those arising from material environmental, social and governance (ESG) risks.

One of the key recommendations is for trustees and providers to clearly distinguish financial risk factors – which must be taken account of; and non-financial (ethical) factors – which can be taken account if certain conditions are met. We will consider afresh whether our current legislation is clear enough in light of the report.

However, we also wish to address some of the behavioural biases that may exist in the industry, such as the assumption that social motivation and good investment returns are not compatible.

In line with the protocol agreed by the Lord Chancellor with the Law Commission, we aim to provide an interim response to both the 5 recommendations and the 11 options for reform by December 2017. We will respond in full within one year of publication, by June 2018.