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Pensions Bill

The hon. Member for Eastbourne (Mr. Waterson) outlined a number of issues. Although the subject was well debated in Committee, there is a reason to return to it now, so I shall thus discuss new clause 12 and amendment No. 39. Taken at face value, it is easy to misunderstand what the UN principles for responsible investment involve. That is why I concur with a comment made by the hon. Gentleman; although Tim Jones's letter in response to the Minister's drawing to PADA's attention the Committee's debate certainly suggested that PADA was interested and would wish to consult on the proposal, it is important to recognise that the UN principles for responsible investment are not a set of strongly binding prescriptive principles that must be followed in every detail or else. Rather, they are about having in place the correct toolkit to examine the range of responsible investment issues. Rather than saying precisely how the toolkit should be used, the principles provide a range of tools for use, and there would, of course, then be an obligation on PADA and, therefore, potentially on the variety of funds themselves, to take the principles into account in making investment decisions. If such a toolkit was not in place, fund managers, for example, would not be able to work effectively with investee companies or to command public confidence that due diligence was being practised. There is significant public concern about this, and the Minister has rightly recognised that in relation to the availability of a sharia law-compliant fund. There was a great deal of public concern in respect of the use of environmental green funds and about the operation of other funds of responsible investment. One of the interesting facts to emerge from the briefing and other material that has been provided for this debate—other analyses also confirm this—is that developing a capability to monitor and manage environmental, social and governance issues, all of which are covered under the UN principles, can also increase both returns and financial security. That business case has already persuaded asset owners and managers with approximately $10 trillion of assets under management to become signatories to the UN principles for responsible investment. Included in that are state funds in France, Norway, New Zealand, Canada and Ireland. As the hon. Member for Eastbourne said, the signatories also include our own Pension Protection Fund, some UK pension funds and a number of major UK asset managers too. That set of principles has not emerged from nowhere, nor is it so outlandish that it could not be adopted. In fact, the principles have been widely adopted by other organisations in the UK and across the world. Of course the issue of cost in following the UN principles of responsible investment has rightly been a concern for PADA throughout the deliberations on this Bill. The evidence that we have is that the cost to fund managers is relatively insignificant, consisting of the costs of employing a small number of staff to examine the environmental, social and governance issues that might arise. Many fund managers already employ staff in that capacity. Other costs might include subscribing to environmental, social and governance research services, and the UN PRI itself asks for a voluntary contribution, although it is perhaps worth noting that the majority of signatories do not pay. Therefore, the costs to beneficiaries of personal accounts would be relatively small and, given the examples that we have of investments in such areas achieving good returns, could be outweighed by the gains. In many areas, in both the public and private sectors, the UK is seen as a world leader in responsible investment. I am sure that is why the Pension Protection Fund, among others, has signed up to the principles. Many would consider it to be very strange if a flagship scheme established by legislation—as we hope personal accounts will be—did not sign up to the principles. I look forward to hearing from the Minister why it is that he is not willing to push the issue a bit harder with PADA at this stage.