Pensions Bill

moved Amendment No. 47: 47: After Clause 66, insert the following new Clause— ““Policy on ethical investment (1) In carrying out its functions under section 66, the trustee corporation must secure that— (a) a written policy on responsible investment is prepared and maintained; (b) the policy on responsible investment is reviewed at such intervals, and on such occasions, as may be prescribed and, if necessary, revised; and (c) the implementation of the responsible investment policy is incorporated into the trustee corporation’s annual report and in the statement of investment principles. (2) In this section ““responsible investment”” means determinations about the environmental, social, human rights and good governance (““ESHG””) practices of the institutions in which investments are made by or on behalf of the trustee corporation, and their relationship to the long term profitability and sustainability of those institutions. (3) A policy on responsible investment may include powers for the trustee corporation, and anyone appointed by the trustee corporation to manage the investment of pension money, to— (a) engage with persons, from whom the trustee corporation purchases securities, to ensure that such persons act, or take steps to act, in accordance with the trustee corporation’s policy on ESHG practices; (b) disinvest or sell, or not purchase or invest in, securities issued by persons whom the trustee corporation determines on reasonable grounds conducts, or has investment in, business operations that are associated with the commission of crimes against humanity, war crimes or genocide, the content of which is defined in the Rome Statue of the International Criminal Court and adopted into English law by the International Criminal Court Act 2001 (c. 17). (4) A policy on ethical investment shall be in writing. (5) The annual report referred to in subsection (1)(c) on implementation of policy against the statement of investment principles shall be made publicly available and cover— (a) key aspects of the trustee corporation’s investment policy and practices against the investment principles; (b) any significant changes in the policy and practices in investment policy against the investment principles over the previous year.”” The noble Lord said: My Lords, I am moving the amendment in the absence of my noble friend Lord Judd, who has asked me to apologise for his unavoidable absence. I pay tribute to the Aegis Trust for its support for the amendment. The purpose of the amendment is to require the trustee corporation to prepare, publish and implement a responsible investment policy as part of its investment principles. A responsible investment policy means that, in addition to the normal principles that are applied in making investment decisions, the trustee corporation would take into account such environmental, social, human rights and governance practices of the institutions in which the investments are to be, or are already, made as are provided for in the policy that the trust corporation will have prepared and published. It is important to emphasise that there is no intention to impose a specific and responsible investment policy on the trustee corporation. It is for the corporation to prepare its policy and to make it as demanding as it sees fit. The amendment should be considered in the context of the statement by the Minister for Pensions, which, in his customary and fair way, my noble friend the Minister drew to the attention of the House in Committee. It states: "““If we are to build a more successful, vibrant, modern economy we can no longer afford to view economic success as being in conflict with social and environmental goals. On the contrary these goals must be seen as integral to economic success and the very essence of sustainable development””." That is the precise reasoning underpinning the amendment. We want the pension corporation to take into account these social and environmental goals of which the Pensions Minister spoke. We believe that the amendment would not only give effect to government support for responsible investment but be of positive benefit to the corporation’s trustees, who would know that it was perfectly legal for them to take social, economic, environmental and human rights practices into account in making their investment decisions. Some trustees believe that the law does not permit them to take ethical practices into account in making their investment decisions. Rather more trustees question whether it is lawful for them to actively engage with corporations in relation to what they see as unethical practices. Even more trustees do not believe that they are permitted by law to disinvest from corporations whose practices they see as anti-social, anti-environment or anti-human rights. The amendment would make it clear to trustees that it is perfectly lawful for them to act in this way. My noble friend the Minister made it clear in Committee that the Government are sympathetic to ethical investments but that they would not agree to include them in the Bill for at least two reasons. The first was the primacy of the trustee of any pension scheme when making investment decisions. However, it is difficult to understand why this principle is so sacred. Trustees have no primacy, for example, to make investment decisions that benefit them personally. They are subject to fiduciary duties and to the requirements of their regulators. It is hardly an infringement of trustees’ primacy to require only that they take into account unethical practices that could harm people or the environment. It is arguable that the trustees’ failure to take account of such practices could be a breach of their duty to act responsibly. The Minister drew attention to the costs and said that the costs of the corporation trustees should be kept to a minimum. It is important to be realistic about costs. The cost of a few extra members of staff to look into environmental and associated matters would be minuscule in relation to the scale of the costs of running the investments that are likely to emerge. The Minister was good enough to invite my noble friend Lord Judd and me to see him. We greatly appreciated that gesture and the fact that he listened carefully to what we said. We still could not convince him but, in view of the points that I have made, perhaps he will feel that the amendment fits in completely with government policy. I beg to move.