Britain is already leading the way to net zero
greenhouse gas emissions.
"The choice of how we proceed as a society does not need to be
between profits or the planet.
Britain is already leading the way to net zero greenhouse gas
emissions. It is right that we acknowledge the existential risks
from climate change, but also grasp that this has the potential
to be turned into the greatest commercial opportunity of our
time.
Pension funds can be at the forefront of seizing these
sustainable opportunities. The best way for our British-based
pension funds to exploit that opportunity is through financing
the green tech and energy revolution that we need.
As a department, we are committed to doing all we can to support
these funds and to providing savers with the information they
need to make informed choices, as they prepare for financial
security in later life.
The Department for Work and Pensions has already taken
significant steps to make progress towards the government’s net
zero targets, including our 2019 Environmental, Social and
Governance (ESG) regulations that require occupational pension
schemes to take account of climate change in their investment
practices.
Coupled with our commitment to effective climate action, we want
to ensure that the record number of people saving for retirement
are provided with the necessary information to make informed
choices about their financial futures.
On that basis, we welcomed the launch last week of the Make My
Money Matter campaign by film director Richard Curtis. The
campaign’s call to engage savers with their pensions savings and
encourage sustainable investments chimes very much with the
department’s priorities.
We have recently passed legislation that requires occupational
pension schemes with 100 or more members to explain how they take
account of climate change in their investment strategies. By
October 2020, all schemes will be required to report publicly how
they do so, as transparency is key to informed decisions and
informed change.
In addition, the Pension Schemes Bill, currently making its way
through Parliament, includes provisions to allow the government
to mandate schemes to adopt and report against the
recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD). This was set up and supported by many key
figures and organisations, including the G20 Financial Stability
Board and the UK Government’s Climate Change Advisor, Mark
Carney, the former Governor of the Bank of England.
These recommendations ask trustees to take into account climate
change within their governance as a financially material risk to
their members’ investments. And they suggest trustees should
disclose how they have done so to their members and the public.
Again with this transparency comes accountability, change and
empowerment.
Further amendments to the Bill, tabled by the government, take
things a step further by allowing schemes to be required to take
into account the Government’s net zero targets, as well as the
Paris Agreement goals of limiting the rise of average global
temperatures.
The government’s progress on one of the most important global
issues has been widely welcomed by industry and civil society
groups but some believe trustees should automatically divest from
certain high-carbon stocks. I strongly believe this is the wrong
approach, and I welcome the clarification from Make My Money
Matter that they are not a divestment campaign.
Government believes a partnership with business is the way to
achieve the innovative change required to get us to net zero.
Holding such assets places trustees in an influential position to
nudge, cajole or vote firms towards lower-carbon business
practices. The tactic of simply selling them to others without
the same environmental concerns is counterproductive.
Similarly, I do not believe, as some have argued, that government
should force pension schemes to align immediately to the well
below 2°C Paris Agreement goal. Forcing schemes to divest from
firms that are still working towards Paris alignment would
prevent their constructive engagement with the firms in which
they invest.
Collaboration is the best approach. The UK can and will lead the
way both in terms of achieving net zero, but also in the
provision of green tech and the financial know-how to get us
there.
Business is going to need long-term finance, a view to a
sustainable future and the City of London’s expertise to get us
there. Net zero is the long-term challenge facing our country.
By engaging savers with their pensions and encouraging
sustainable investments, as the Make My Money Matter campaign
says, we can do this."
This article was previously published in The Telegraph, on 7 July
2020.
