I do not know whether the noble Lord has put his name on the list to meet, but it looks as though I am able to offer him a meeting on the consultation first, if that is helpful, to try to get to where he wants to be.
Going back to the point raised by my noble friend Lady Altmann about schemes not having a website, schemes are not required to set up a website to publish their statement of investment principles or other documents.
The information must be published on a publicly available website in a manner which allows for the content to be indexed by internet search engines. This can include a social media site, a blogging platform or a repository offered by a search engine provider, as long as trustees have ensured that the document is public and can be indexed. The Government are not in the business of endorsing publishing tools, but Facebook, WordPress and Google Docs allow for free publication.
Coming on to my noble friend Lady Altmann’s point about what is meant by a large scheme, following the passage of the Bill, we will consult extensively in the summer on what schemes should be in scope and how the scope will increase over time. My noble friend also said that the Pensions Regulator is not doing anything about breaches of ESG legislation. The chief executive of the Pensions Regulator has written to DWP to confirm that it is taking action. The regulator has engaged with the findings of the UK Sustainable Investment and Finance Association on the poor state of compliance among some pension schemes and will follow up on breaches of compliance.
My noble friend Lady Altmann also said that pension schemes should be required to align their portfolios with the Paris Agreement to reach net zero by 2050. The Government’s amendment and subsequent regulations will focus on schemes’ governance of climate risk and disclosure of that risk. We do not wish to direct pension schemes to align their investments with the Paris Agreement targets, and the legislation does not allow us to do so. Nevertheless, Paris alignment reporting could be useful as a measure of climate-related risk to the scheme. We will consult over the longer term on whether it is a useful assessment of a scheme’s exposure and risk.
I have already come clean to the noble Baroness, Lady Hayman, on whom to credit for the speedy inclusion of the amendments. She also raised a point about taking account of members’ views. The Law Commission has found that pension schemes have a fiduciary duty to take account of all financially material risks, including environmental risks. We have legislated to require all schemes with 100 members to publish their policies on financially material environmental risks, including climate change, and defined contribution schemes will be required to report annually on how they manage those risks from October 2020.
Trustees do not have a duty to take account of members’ ethical concerns but are free to do so when they believe a majority of members who express a view share those concerns and when doing so would not result in significant member detriment. The noble Baroness, Lady Hayman, asked why we will not legislate for personal pension schemes. Personal pension schemes are regulated by the Financial Conduct Authority, not the Pensions Regulator. To place requirements on personal pension providers through this legislation would create a patchwork of overlapping regulatory oversight under which providers would have to respond to two separate regulators on the same activity. The FCA is currently considering how best to enhance climate-related disclosures by workplace personal pension schemes, building on its existing rules framework and enforcement powers. I will write on the number of members of personal pension schemes.
The noble Baroness, Lady Hayman, asked whether dashboards will include pension schemes’ environmental, social and governance policies. We are very interested in how dashboards can support and increase engagement, including whether information on areas such as ESG, which trustees are required to cover as part of their disclosure obligations, may be incorporated into the dashboards. This is to be informed by user testing and may evolve over time.
The noble Baroness, Lady Bennett, quoted the Minister for Pensions, who wrote,
“pension schemes ought to be thinking about the assets which help … drive new investment in important sectors of the economy … which deliver the sustainable employment, communities and environments which all of us wish to enjoy.”
How will we meet this if the scheme does not know members’ wishes? The Government have been very clear that the purpose of a pension scheme trust is to deliver an appropriate return to its beneficiaries. The context of the Minister’s quote makes this clear and that it is possible to deliver this while having a beneficial effect on the communities in which they invest. The noble Baroness also talked about the implementation and chair statements being published. Schemes are already required to publish their chair’s statement and implementation statement. We are working closely with the regulator to develop a central index that can also be applied to the implementation statement and the chair’s statement.
Finally on the point raised by the noble Baroness, Lady Bennett, about pension schemes being required to go beyond climate change to consider sustainability more broadly, trustees already have clarity that they should take account of financially material social and environmental risk in investment policies. This includes, for example, considering violations of human rights laws and destructive environmental practices. In practice, most trustees do not actively manage investments and cannot make stock selections, but the Government have set the requirement for a clear policy which will be published and shared with those managing the investments. As I have said before, the Government do not tell pension schemes how to invest. Seeking to do that would force trustees to chose between acting in the best interests of members and following government directions.
I hope I have answered all noble Lords’ questions and therefore urge the noble Baroness to withdraw her amendment and urge noble Lords to support the amendments standing in my name.
6 pm