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Pensions Bill

In supporting both amendments tabled by my noble friend Lord Judd, I shall be brief because my noble friend has dealt comprehensively with all the issues. I will touch on only three matters. First, I draw attention to British companies that are operating in Zimbabwe, Sudan and Burma, which have recently been criticised by the Government and across all parties. Despite that, if a pension fund were to disinvest from any of these companies on the grounds of its human rights record, that may be considered to be an unlawful decision of the trustees. Surely UK law should be clarified to allow disinvestment when it is entirely consistent with government policy and when not doing so might be contrary to that policy. I listened carefully to the concerns of the noble Lord, Lord Skelmersdale, in this regard, and I think it is important to differentiate between a mandatory and an aspirational or voluntary requirement. It is proposed that trustees should be given a right, which they may or may not accept. Of course, one assumes that trustees will be responsible and make decisions carefully, and one can visualise a situation where a company will need to disinvest. As my noble friend pointed out, the reputational cost to some companies of carrying on in certain fields is so high that the value of the equity in the company goes down and disinvestment is in the interests of the beneficiaries of the pension scheme. Therefore, essentially, all that is being asked for in this amendment is that, if trustees want to disinvest for very good reasons, they should have the right to do so without being concerned about whether there are legal considerations or arguments against it. When I referred to companies operating in Zimbabwe, I should have added that I have just received a letter from Anglo American rejecting the criticisms levelled against it and citing facts that support its contention. Secondly, I refer the Committee to a report of 7 April by John Ruggie, the UN special representative on business and human rights, entitled Protect, Respect and Remedy: a Framework for Business and Human Rights. Professor Ruggie stresses the importance of Governments taking a wider approach across the parties to business and human rights policies. He points out that many companies take a narrow approach to managing the human rights agenda, which is often segregated within a company’s institutional box and kept away from other policy domains that shape business practice, including investment policy. He concludes that this inadequate domestic policy coherence is replicated internationally. In the debate on the Pensions Bill in another place, the Government’s response to an opposition amendment seeking to sign up to the United Nations principles on responsible investment demonstrated that incoherence in action. The response was that they would applaud trustees choosing to adhere to these principles but that the Pensions Bill was not the place to address such issues, as the fund should be kept as simple as possible with no bells and whistles. I suggest that the fund would not be unduly complicated as a result of permitting the trustees in the default fund to take human rights, environmental and social issues into account in their decision-making process. There was also government concern about additional costs being incurred. Based on my long experience in the life assurance and pensions industry, I think that the costs of an ethical policy are likely to be insignificant in relation to the total costs of what will become a very large fund. Finally, in its briefing on the Pensions Bill, the TUC also supports the principle of environmental, social and corporate governance in investment decisions—although not necessarily commitment to the UN principles, because it feels that commitment to a single batch of principles which might change in the future may cause problems. The Pension Protection Fund, set up by the Government, also subscribes to these principles. As my noble friend said, the principles are not prescriptive but voluntary and aspirational, so where better to ensure that ethical investment is part of investment policy than in what is likely to become the UK’s largest pension fund set up by the Government, and when better than at the beginning of the process?