Guy Opperman is the Minister for Pensions and Financial Inclusion, and is MP for Hexham.
I’m delighted to have been reappointed as Minister for Pensions and Financial Inclusion by Boris Johnson. In the past two years, we’ve achieved so much, from supporting the introduction of the Mid-Life MOT, to pioneering the Pensions Dashboard. But there is so much more to do, and now is the time to keep moving forward.
One of the most exciting changes I am proud to have been part of is the work we are undertaking to tackle climate change. This October, a change is coming that will have a bigger effect on tackling climate change than almost any other decision by government.
We are taking a massive step forward by introducing new Environmental, Social and Governance regulations, or ESG for short. ESG requires occupational pension funds to invest with environmentally sensitive principles and take account of climate change. With our UK pension funds managing well over £1 trillion in assets, their investment power is immense.
When saving for a pension, I am convinced that most people want two key things in return. Firstly, and indeed crucially – a balanced portfolio that produced a secure, long-term return to live on in retirement. But also that our investments have a higher purpose. That when our pension is invested, it should be invested in an ethical way.
We know that the world is facing a Climate Emergency. We can all see that we are losing the ice pack, endangered species and our tropical forests at an alarming rate. The term ‘emergency’ may sound alarmist, but if we don’t address these long-term problems now, there won’t be a long term.
As a country, we have already made great strides to reduce our carbon footprint; carbon emissions have fallen by 25 per cent – the largest reduction in the G20. We’ve just had the longest coal-free run since the 1880s, and green energy is on track to produce most of the Britain’s electricity this year for the first time.
And in June, Britain became the first major economy to legislate for net carbon zero by 2050 – meaning that our contribution to climate change will end in a little over three decades. Our net zero target is undoubtedly ambitious, but if we all – from government down to individuals – make small but significant changes, we can make a real difference.
There are some MPs on the opposition benches in Parliament who believe that the only way to halt climate change is to overthrow capitalism – to introduce a new economic system. I am afraid they are utterly wrong. I believe that it is capitalism itself that can save our planet.
For too long, there has been a perception by too many pension trustees that the environmental practices of the firms they invest in are purely ethical concerns that they do not need to worry about. This is utterly wrong and cannot continue. Under the new ESG regulations, trustees now must consider the environmental practices of the firms they invest in before taking investment decisions to create a balanced portfolio. This will make a real difference and give pensions trustees the nudge they need to do their part to tackle climate change. But going forward, we can do so much more.
Our pension funds have exactly what we need to tackle this problem. A lot of capital, an ability to think very long term, and no political agenda. Clearly, if we do not harness the financial muscle of these massive pension portfolios, we are missing a trick.
Britain has Greentech firms innovating to help tackle consumers tackle climate change and drive down the cost of providing energy, but they need investment to continue innovating. So going forward, as part of a balanced portfolio, pensions trustees should be supporting our climate friendly companies.
Thanks to the government’s automatic enrolment programme, more than ten million employees have been enrolled into an occupational pension – now saving eight per cent of their annual income. It is undoubtedly one of the greatest success stories of the Conservative and coalition governments.
Ethical investment can no longer be a niche. It needs to be mainstream. What bigger challenge is there than addressing the climate emergency? As I said, if we don’t address these long-term issues now, there won’t be a long-term.
My colleagues in Parliament tell me that pensions are not sexy, but this time it could be pension power that is the force for good to address our twenty-first century problems.