Jonathan Reynolds, the shadow secretary for work and pensions: ‘This measure would show the UK as a world leader in the efforts to meet our Paris goals’
Jonathan Reynolds, the shadow secretary for work and pensions: ‘This measure would show the UK as a world leader in the efforts to meet our Paris goals’ © Bruce Adams/ANL/Shutterstock

UK pension schemes would be compelled to be carbon neutral by 2050 under a push by the Labour opposition party to force asset managers to step up their efforts on climate change.

A Labour amendment to the pension schemes bill, in its final stage in parliament, would require pension schemes to align with the Paris agreement on climate change by 2050 “or sooner”.

The 2015 agreement set a goal to strengthen the global response to the threat of climate change by limiting global temperature rises.

“The climate emergency demands urgent action,” said Jonathan Reynolds, shadow secretary of state for work and pensions.

“We urge the government to show they are committed to tackling the climate emergency and back our amendment. This measure would show the UK as a world leader in the efforts to meet our Paris goals.”

The Labour amendment for schemes to become carbon neutral would be a significant toughening of the government’s current proposals, affecting retirement schemes managing billions of pounds of retirement savers’ cash.

The current government measures in the bill will make it mandatory for workplace schemes to manage the effects of climate change as a financial risk and to report on how they have done so.

The government has said the UK is one of the first countries in the world to put climate-change reporting into law.

“Although the government’s commitment to introduce mandatory reporting on the risk of climate change is welcome, it needs to go further,” said Ed Matthew, co-director of campaign group The Climate Coalition.

“This [Labour] amendment would ensure all pensions companies get in line with net-zero and the Paris agreement.”

In response, the Department for Work and Pensions said: “We are carefully considering all amendments to the pension schemes bill and the government will detail its response in parliament.”

The new climate reporting requirement is the latest in a series of government measures in recent years aimed at forcing scheme trustees to tighten their focus on climate risks.

Separate measures in the pension schemes bill set new requirements for calculating a pension scheme’s carbon footprint and assessing how the value of scheme assets might be affected by temperature increases.

Since 2019, schemes have been required to set out their investment policies on environmental, social and governance matters, including climate change.

“With many pension schemes already leading the charge on responsible investment and already committed to net-zero strategies, these blanket proposals [Labour amendments] are unnecessary,” said the Pensions and Lifetime Savings Association, the trade body for workplace pension schemes in the UK.

“More importantly, [the proposals] break the principle that trustees should apply their fiduciary duties, and their responsibility to invest in their members’ best interests.”

Chancellor Rishi Sunak this week announced plans to force big companies and financial institutions to report their climate risks within five years.

MPs are due to vote on amendments to the pension schemes bill on Monday.

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