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Pensions Bill [HL]

My Lords, I thank the noble Lords, Lord German and Lord Stoneham, for tabling these three amendments. They encourage trustees and managers of occupational and stakeholder pension schemes to engage more fully with environmental, social and ethical considerations in the selection and retention of their investments. These are important issues. They resonate with me personally. I remember writing many a happy Lex column in the 1980s on the structural issue. The issue is the separation of the responsibilities of ownership and the attraction of investment returns in the marketplace. Trying to get them back together has proved very difficult. A lot of effort has been thrown at it in the past decade, with the Myners principles and the IGG. The amendments would have a similar effect on the trustees and managers of occupational and stakeholder pension schemes. Therefore, we should look at the amendments together. There has been a consensus in many previous debates on social and environmental issues that companies perform better when their activities are monitored by shareholders. Therefore, it is important for pension funds and their investment managers to be transparent in publishing their approaches to such issues in their statements of investment principles. That is why this Government, like the previous Government, have been open to suggestions on how to improve this process. In the end, it is a matter for managers and trustees to determine the level at which they engage and what is appropriate for them. It is a statement of the obvious that small schemes, in particular, may not be able to take account of governance issues to the extent that large schemes can. As noble Lords will be aware, existing legislation already requires both occupational schemes and stakeholder schemes to include a declaration in their statement of investment principles. This declaration covers the extent to which social, environmental and ethical considerations are taken into account in their investments. The effect of these amendments would, therefore, be limited because they do not require schemes to take into account ethical considerations in their statement of investment principles. I understand that this is a probing amendment which is aimed at opening up the issue. However, the amendments would also impose two new requirements on occupational schemes: first, information would need to be disclosed automatically, whereas it is currently provided only on request; and, secondly, the information would have to be updated yearly as opposed to every three years, or more frequently if there are any significant changes. Despite the noble Lord’s point that members find it difficult to get information, there should be access to this information—and if the information is changing frequently because of immediate events, one year will not do the trick. However, it is more standard for the approach not to change in the period between one and three years. The amendments would therefore impose quite an additional burden. Moreover, the burden would not be placed on investment vehicles other than pensions, and that would create an uneven playing field between investment scheme types. We need to be pretty careful about that. On the other hand, there would generally be agreement with my noble friend Lord Boswell’s point on business utility. One has only to look at what happened to BP last year with Deepwater Horizon to see that a greater concern, and perhaps some pressure on the BP board by its shareholders in relation to environmental issues, might have been especially valuable to the company. An elaborate process began in 2001 with the Myners principles. That process has moved on with the Investment Governance Group, which reported in November last year, and the six principles covering three stages of investment governance. It is probably right that this kind of concern is reflected in that process and covers the whole industry rather than particular segments of it. That is where the pressure that the noble Lord has successfully registered with these amendments should go. However, I will take back his points and pass them on to the relevant parts of government. My former close colleague the noble Lord, Lord Sassoon, will hear directly from me. I urge my noble friend to withdraw the amendment.