Thank you to all those who contacted me about the Pension Schemes Bill, particularly requesting my support for Amendment NC17 and Amendment 2.
The Pension Schemes Bill is currently on Report Stage in the House of Commons, and 35 amendments have been tabled for consideration.
Pension trustees already have well-established duties under scheme rules, common law, and legislation. These include the responsibility to make decisions in the best interests of their members.
In my view, as outlined in a 2024 report from the Financial Markets Law Committee (FMLC), there is a strong case for pension trustees to consider wider matters, like climate change and other environmental factors, as ‘financial factors’ in investment decision-making. This report is built on previous conclusions from the Law Commission, that there was nothing stopping pension schemes from considering environmental, social and governance factors in investment decisions, and that these should be accounted for where they are financially material.
Under existing rules, trustees may also take factors which are not strictly financial into account. This can extend to decisions which are supported by members but may involve a risk of financial detriment. Similarly, the FMLC’s report found that ‘financial factors’ are broad, and many factors that may appear at first to be ‘non-financial’ are in fact ‘financial’. This goes to show the flexibility of fiduciary duties as they currently stand.
Pensions reform is a top priority for me, and the Pension Schemes Bill explicitly recognises the fiduciary duty of trustees towards their members. The Bill will create bigger, better pension funds that can engage more effectively with companies on environmental and social issues. The consolidation of pension schemes will also enable investment in a wider range of assets, including growth sectors like green projects, and those focused on sustainability and long-term impact. This will deliver sustainable prosperity while benefiting savers.
I was elected on a pledge to mandate UK-regulated financial institutions to develop and implement credible green transition plans that align with the Paris Agreement. I stand by this promise, and I know Ministers recently held a consultation on implementing it. Large pension funds are already required to report on how they are responding to climate risks and making climate-focused investments. The Government will review these rules, alongside its consultation on new UK Sustainability Reporting Standards. Taken together, these measures will support the environment and improve investor accountability.
Thank you once again to everyone who got in touch about this important issue.