A coalition of charities and trade unions is lobbying the UK government to amend the Pensions Bill, announced last week, to include provisions for green investment and climate action.
More than 30 organisations have urged pensions minister Torsten Bell to revise the legislation to reflect the importance of environmentally sustainable growth. The campaigners argue that the reforms present a key opportunity to align the UK pensions system with the transition to a low-carbon economy.
The Bill, unveiled last Thursday, sets out major reforms to the UK pensions landscape, aiming to accelerate consolidation within defined contribution (DC) schemes and the Local Government Pension Scheme (LGPS), and to attract more private capital into the UK economy.
However, charities, unions and industry bodies have criticised the government for failing to link the reforms to the energy transition. Jesse Griffiths, CEO of the Finance Innovation Lab, said: “The Bill’s failure to link pensions reform to greening the economy is startling, given that climate change is the biggest threat to security in retirement for pension savers. We hope the government can be persuaded to amend the Bill to make the obvious links between green investment, sustainable growth, clean energy, and tackling climate change.”
This sentiment was echoed by Catherine Howarth, CEO of ShareAction, who warned that the legislation lacked ambition. “As it stands, the Bill is a missed opportunity to clarify the fiduciary duty of pension schemes. Fixing this problem would benefit pension savers, their trustees, and the UK’s faltering economy,” she said.
Now laid before Parliament, the Bill will progress through committee and report stages, during which amendments may be proposed.
The organisations – which include think tanks such as the New Economics Foundation and Positive Money, as well as major trade unions – are calling for an inclusive consultation process to ensure their concerns are addressed.
Nonetheless, uncertainty remains over how the UK government should best encourage private sector support for the energy transition. The Finance Innovation Lab has proposed, among other measures, issuing green bonds through the National Wealth Fund to help mobilise institutional investment.
A key point of contention is the issue of mandation – whether the government should compel pension funds and other institutions to allocate a set proportion of their portfolios to UK assets. Many investors have pushed back against this idea, arguing that government efforts should focus on providing incentives rather than imposing requirements.
Share Action, one of the backers of a push to invest more in clean assets said the amendment proposed would be asset-class neutral and was aimed at reducing legal risks for trustees whilst making it easier to voluntarily invest in the UK economy.
