Pension investment: DWP to ‘wholeheartedly resist’ prioritising green agenda over returns

Guy Opperman discusses the 'priority' for pension trustees

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Pension savings and investments have been identified by many as a key tool to use to combat the effects of climate change. Today, Guy Opperman, the Parliamentary Under-Secretary for the DWP, was questioned on the Government’s plans on utilising pensions to move to a “net zero” agenda.

During this work and pensions committee questioning, Nigel Mills, the Conservative MP for Amber Valley, pushed Mr Opperman on how pension scheme trustees/investors should act when prioritising commitments.

Mr Mills asked: “Should pension trustees be investing to get the best pension [result] for their scheme members or should they be investing to meet climate and other objectives? What should their priority be?”

Mr Opperman responded to this by detailing overall goals for pension schemes should not be changed but the Government should step in where it can.

Mr Opperman said: “It is not my view that fiduciary duties should be changed in this particular way.

“I know that that was the prevailing view of the witnesses who came to you I think on the 30th of June…

“….It’s not the view of the PSA or various trustee organisations or pensions organisations, so I would certainly resist that.

“I do think what the Government can do is, which I’ve outlined already, in the context of investment decisions that a trustee makes, and then ultimately the asset manager makes, we need to make sure that due account has been taken of climate risk and climate change in those decisions.

“So instead of forcing trustees to do X Y or Z, we require them to consider these matters and then report back as to how that has been considered.

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“And bare in mind that climate risk is a risk to every single asset that there is.

“There is no asset effectively that is immune to climate change and climate risk, so these methods are already being considered.

“But I would wholeheartedly resist a fundamental change to fiduciary duty in the way in which it’s been suggested by some.”

Many pension holders who may be concerned about the climate may wish to tweak their pensions themselves, as new research showed “greening” a pension can be one of the most effective methods of fighting climate change.

Recent research from Make My Money Matter, Aviva and Route2 found that making a pension green is the “single most effective action an individual can take to reduce their carbon footprint.”

According to their findings, greening a pension is “a staggering” 21 times more powerful at cutting a carbon footprint than stopping flying, becoming a vegetarian and moving to a renewable energy provider combined.

The research calculated an average sized pension pot moved from a traditional fund to a sustainable option can be expected to save 19 tonnes of carbon a year, while savers with a larger pension of at least £100,000 could save up to 64 tonnes of carbon, which is nine years’ worth of the UK citizen’s average carbon footprint.

Additionally, Make My Money Matter stated “it is vital that individuals continue to take these steps to reduce their climate impact, but also make sure their money complements those efforts, rather than undermine them.”

The same research also came at a time where the financial case for sustainable pensions is also on the rise, with evidence showing that sustainable funds are now matching or outperforming their traditional counterparts.

Richard Curtis, the Co-Founder of Make My Money Matter, commented on these results.

Mr Curtis said: “We have taken real collective steps in our society to become greener in our day-to-day lives. However, I helped create Make My Money Matter after being alerted to the fact that our pensions could be undoing all of our hard work without us even knowing. These findings confirm just how important our money is in the fight against climate change. In fact, our pensions are the most powerful weapon we have to help protect the planet.

“We need the entire UK pensions industry to go green – making their default funds more sustainable so all savers can have a pension to be proud of. As individuals, we have a critical role to play in driving this change by showing providers that we want our money invested in a way that does good, not harm and, so that we can retire into a world that isn’t on fire.

“That’s why we are calling on all UK savers to take the 21x challenge and ask their provider to go green in 2021, meaning that their scheme is committed to urgent carbon reduction targets, halving emissions this decade, and actively investing in solutions that help save our planet.”

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