Pension funds can do more to mitigate climate change and should feel empowered to do so, according to Caroline Lucas, former leader of the Green Party.
Debating whether environmental, social and governance (ESG) investment strategies have a future, in a session at the Pensions UK Investment Conference in Edinburgh yesterday (11 March), Lucas said that investing in opportunities that build a resilient future is looking after member interests.
“Environmental policy and pension policy are still seen too much as separate domains, and that separation is no longer intellectually or practically sustainable,” said Lucas.
“18-year-olds who are putting their money into pension funds today need to know that that money isn’t undermining the very future that they hope to enjoy with their retirement savings.”
Caroline Lucas
“In a three-degree heating world, 18-year-olds who are putting their money into pension funds today need to know that that money isn’t undermining the very future that they hope to enjoy with their retirement savings…
“As things stand right now, that pension fund money could be essentially sawing off the branch upon which they hope to sit later on because it is precisely driving the environmental and climate crisis.”
Lucas’ opponent in the debate was Michael Gove, former Secretary of State for Levelling Up, Housing and Communities. He argued that pension funds should focus on their fiduciary duty rather than focusing on ESG policies.
“It is the government’s direct responsibility to deal with climate change, through taxation or subsidy,” he said. “Your responsibility is to ensure that those individuals, many of whom will be relatively low earners, have the security of knowing that you are seeking the very best possible return for them at every point.
“Whenever government seeks to direct, mandate, nudge or otherwise control how you invest, they are taking you away from your principal duty, which is to look after your members’ investments.”
Michael Gove
“Whenever government seeks to direct, mandate, nudge or otherwise control how you invest, they are taking you away from your principal duty, which is to look after your members’ investments.”
Where funds believe particular climate investment strategies are beneficial for members, they should take accountability for them and not hide behind government ESG policies or requirements, Gove contended.
Lucas emphasised that addressing climate change was in the best interest of members due to the “extraordinary poly-crisis” presented by a “world that is becoming increasingly unstable economically and environmentally”.
She added: “We should be using all of the resources at our fingertips in order to be able to ensure that we have a safe transition – precisely for those members of pension funds who want a liveable planet upon which to enjoy their pensions.”
Gove’s position resonated more with the delegates, two-thirds of whom voted for the assertion that pension funds are meeting their obligations on climate change investments.
