Pension stewardship and COP26

Work and Pensions Committee Closed Inquiry
Opened: 29 Apr 2021 Closed: 2 Feb 2022 Parliament page
The UK hosted the 26th UN Climate Council Conference of Parties - COP26 - in Glasgow between 1 and 12 November 2021. In March 2021, the Minister for Pensions and Financial Inclusion announced that “world leading regulations” will come into force ahead of COP26, following the Government’s consultation, Taking action … Read more
14 Recommendations
6 Conclusions
1 Report
2 Oral sessions
2 Events
Activity timeline 6 events
17 Dec
2021
Report published
30 Sep
2021
Report published
14 Jul
2021
Oral evidence
14 Jul
2021
Formal meeting (oral evidence session) · Room 6, Palace of Westminster
30 Jun
2021
Oral evidence
30 Jun
2021
Formal meeting (oral evidence session) · Room 8, Palace of Westminster
Oral evidence sessions 2 sessions
14 Jul 2021
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Work and Pensions
Emma Varley · Department for Work and Pensions Guy Opperman MP · Department for Work and Pensions Pete Searle · Department for Work and Pensions
30 Jun 2021
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Pension stewardship and COP26
Andrew Ninian · Investment Association James Alexander · UK Sustainable Investment and Finance Association Mark Fawcett · Nest Morten Nilsson · BT Pension Scheme Paul Bucksey · Smart Pension UK Sam White · Aviva Tony Burdon · Make My Money Matter
Title HC No. Published Items Response
Fourth Report - Pension stewardship and COP26 HC 238 30 Sep 2021 20 Responded
Recommendations & Conclusions
20 results
1 Recommendation
Fourth Report - Pension stewardshi…
COP26, which will take place in Glasgow in November, may well be the largest summit...
COP26, which will take place in Glasgow in November, may well be the largest summit ever hosted in the UK and it provides a major opportunity for the UK to show global leadership. We recommend that the UK Government should … Read more
Department for Work and Pensions
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2 Recommendation
Fourth Report - Pension stewardshi…
The Minister for Pensions and Financial Inclusion told us that the Government as a whole...
The Minister for Pensions and Financial Inclusion told us that the Government as a whole is responsible for sharing best practice internationally on investment reporting. We recommend that, in order to increase the prominence and accountability of this important task, … Read more
Department for Work and Pensions
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3 Recommendation
Fourth Report - Pension stewardshi…
Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and...
Global harmonisation of climate-related reporting standards would considerably reduce the burden on pension schemes and the associated costs of meeting different reporting requirements. It would also improve the comparability of different assets across international borders. COP26 provides a significant opportunity … Read more
Department for Work and Pensions
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4 Recommendation
Fourth Report - Pension stewardshi…
We welcome the Government’s decision to include provisions in the Pension Schemes Act 2021 to...
We welcome the Government’s decision to include provisions in the Pension Schemes Act 2021 to require pension scheme trustees to fully consider and disclose their climate-related financial risks and opportunities in line with recommendations by the Task Force on Climate-Related … Read more
Department for Work and Pensions
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5 Recommendation
Fourth Report - Pension stewardshi…
Trustees will need detailed and regularly updated guidelines provided by the Pensions Regulator to explain...
Trustees will need detailed and regularly updated guidelines provided by the Pensions Regulator to explain how they should consider the effects of climate change on pension scheme members. We recommend that the Pensions Regulator continuously monitor and update these guidelines. Read more
Department for Work and Pensions
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6 Recommendation
Fourth Report - Pension stewardshi…
A green taxonomy will be vital to the success of measures introduced by the Government...
A green taxonomy will be vital to the success of measures introduced by the Government to tackle climate change. It will support pension schemes, especially smaller schemes, in assessing the merits of different investments and avoiding the risk of “greenwashing”. … Read more
Department for Work and Pensions
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7 Recommendation
Fourth Report - Pension stewardshi…
We have not considered wider environmental, social and governance factors in detail during our inquiry.
We have not considered wider environmental, social and governance factors in detail during our inquiry. The Department for Work and Pensions’ consultation on social risks and opportunities by occupational pension schemes closed recently and it is important that these factors … Read more
Department for Work and Pensions
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8 Recommendation
Fourth Report - Pension stewardshi…
Making green investments, particularly in infrastructure, can be complex and costly.
Making green investments, particularly in infrastructure, can be complex and costly. Larger schemes are usually better placed to meet those costs and to provide the high level of scheme governance required. We welcome the intent of the Department for Work … Read more
Department for Work and Pensions
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9 Recommendation
Fourth Report - Pension stewardshi…
The idea of “net zero alignment” does not have a single clear definition.
The idea of “net zero alignment” does not have a single clear definition. Without a standardised definition, there is a risk that different pension schemes will interpret “net zero” in different ways. That will make it more difficult for savers … Read more
Department for Work and Pensions
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10 Conclusion
Fourth Report - Pension stewardshi…
Many schemes have already set net zero targets voluntarily.
Many schemes have already set net zero targets voluntarily. We encourage other schemes to consider whether they should also set net zero targets. While we recognise that any target must not undermine trustees’ fiduciary duties, we believe that in many … Read more
Government Response
The Government agrees with the Committee’s recommendation. The Department for Work and Pensions welcomes the ambition of a growing number of schemes voluntarily setting net zero targets and will continue … Read more
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11 Recommendation
Fourth Report - Pension stewardshi…
While larger schemes are setting net zero targets, it is likely that many smaller schemes...
While larger schemes are setting net zero targets, it is likely that many smaller schemes will not have the resources to do this effectively without support and guidance. Ambiguity about whether net zero targets would put trustees at risk of … Read more
Department for Work and Pensions
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12 Recommendation
Fourth Report - Pension stewardshi…
Defined contribution schemes used for automatic enrolment are required to have a default option into...
Defined contribution schemes used for automatic enrolment are required to have a default option into which the member is enrolled, unless they specify an alternative. We recommend that the Government consult on the case for mandating that these default options … Read more
Department for Work and Pensions
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13 Conclusion
Fourth Report - Pension stewardshi…
As a large scheme the Local Government Pension Scheme (LGPS) could be well placed to...
As a large scheme the Local Government Pension Scheme (LGPS) could be well placed to demonstrate and develop best practice in pension scheme governance, including on climate change. The Minister for Pensions and Financial Inclusion told us that, in his … Read more
Government Response
The Government’s Net Zero Strategy,35 which was published on 19 October, provides a cross-economy climate roadmap on the UK’s transition to net zero by 2050, including the action government will … Read more
Department for Work and Pensions
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14 Conclusion
Fourth Report - Pension stewardshi…
There are a limited number of suitable green assets in which pension schemes can invest.
There are a limited number of suitable green assets in which pension schemes can invest. That means that there is a risk of a “green asset bubble” in the short term, as the market for these products develops. It is … Read more
Government Response
The Government does not agree with the Committee’s recommendation. It would not be practically feasible to publish information on direct investments. It is typical for an occupational pension scheme to … Read more
Department for Work and Pensions
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15 Conclusion
Fourth Report - Pension stewardshi…
Pension schemes may already be exposed to brown asset bubbles.
Pension schemes may already be exposed to brown asset bubbles. Investments, such as non-renewables, may be overvalued if investors have not yet adequately accounted for the cost of changes resulting from either climate change or policies to mitigate climate change. Read more
Government Response
The Government agrees with the Committee’s recommendation. The Department for Work and Pensions is keen to ensure that its policies do not incentivise divestment over good stewardship. The Department has … Read more
Department for Work and Pensions
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16 Recommendation
Fourth Report - Pension stewardshi…
Pension schemes make long-term investment decisions for their members.
Pension schemes make long-term investment decisions for their members. A clear UK—and, where possible, international—climate change strategy will provide greater certainty for pension schemes to make long-term investments. We recommend that the Government set out a UK climate roadmap—including sector … Read more
Department for Work and Pensions
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17 Recommendation
Fourth Report - Pension stewardshi…
Direct investment by pension schemes in green infrastructure and other illiquid assets has the potential...
Direct investment by pension schemes in green infrastructure and other illiquid assets has the potential to benefit savers and the environment. We recommend that the Department for Work and Pensions publishes information about levels of direct investment by pension schemes … Read more
Department for Work and Pensions
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18 Conclusion
Fourth Report - Pension stewardshi…
The charge caps on default pension saving products used for auto-enrolment are an important part...
The charge caps on default pension saving products used for auto-enrolment are an important part of ensuring good value for savers who have not made an active decision about where their pension should be invested. However, we support the Government’s … Read more
Government Response
The Government notes the Committee’s concern that charge caps on default pension saving products used for auto-enrolment are an important part of ensuring good value for savers who have not … Read more
Department for Work and Pensions
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19 Conclusion
Fourth Report - Pension stewardshi…
The purpose of pension schemes setting net zero targets is not solely that the schemes...
The purpose of pension schemes setting net zero targets is not solely that the schemes themselves should be net zero aligned, but that they should make an impact in reducing the real economy’s contribution to climate change. Good stewardship is … Read more
Government Response
The Minister for Pensions and Financial Inclusion set up the TPSVI in December 2020, to address problems in the voting of equity shares by pension schemes. The Taskforce focused on … Read more
Department for Work and Pensions
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20 Recommendation
Fourth Report - Pension stewardshi…
Divestment is the process of selling assets already held by a pension scheme.
Divestment is the process of selling assets already held by a pension scheme. Divestment remains a fallback strategy for pension schemes with investments in assets which are unable to reduce their contribution to climate change or where a good stewardship … Read more
Department for Work and Pensions
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