PARLIAMENTARY WRITTEN QUESTION
(3 December 2024)

To ask the Secretary of State for Work and Pensions, what assessment her Department has made of whether the divestment of pension funds from insurance companies that are not compliant with the UK’s climate commitments is a part of fiduciary duty.

Asked by:
Clive Lewis (Labour)

Trustees have a fiduciary duty to make investment decisions in members’ best interests. Climate-related risk and opportunity is one of the major categories of financial factors of which trustees need to take account, in line with their fiduciary duty.

The Department introduced new requirements for schemes in 2021, based on the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). The legislation requires trustees of occupational pension schemes, with assets above £1 billion, to manage climate-related risks and explain how they have done so in an annual TCFD report. The Pensions Regulator is responsible for monitoring compliance with the requirements and reviewed a sample of reports in 2024. The findings are available here: Review of climate-related disclosures by occupational pension schemes: Year 2 | The Pensions Regulator.

It is up to individual schemes, in line with their fiduciary duty, to choose whether to divest from companies that are not compliant with the UK’s climate commitments. In 2025, Government will consult on proposals for financial institutions, including insurance companies, to develop Paris Aligned Transition Plans which set out steps for reaching net zero. Pension schemes can utilise their stewardship approaches, namely voting and engagement, to nudge companies towards greener practices. There is no single approach to managing climate-related risk, but trustees typically use a combination of investment strategies and stewardship approaches to deliver the best outcomes for members.

Answered by:
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1 January 1970