Lib Dems to require climate reporting from pension funds

Unveiled this morning (10 June) by party leader Sir Ed Davey, the Liberal Democrats’ manifesto pledged to “require pension funds and managers to show that their portfolio investments are consistent with the Paris Agreement”.

The party called for “urgent action” against the “existential threat” of climate change, including ambitious initiatives to achieve net zero carbon emissions across the UK economy by 2045 “at the latest”.

One of the Liberal Democrats’ main climate policies was stated as: “Regulating financial services to encourage climate-friendly investments, including requiring pension funds and managers to show that their portfolio investments are consistent with the Paris Agreement, and creating new powers for regulators to act if banks and other investors are not managing climate risks properly.”

The UK already has some climate reporting requirements in place for pension schemes. Those with more than £1bn in assets have had to publish reports in line with the Task Force on Climate-related Financial Disclosures (TCFD) since 2022.

Matthew Downey, investment consultant at Broadstone, said the “political direction of travel looks likely to introduce further reporting requirements to stimulate ever greater sustainability”.

He added: “It is clear that pension fund trustees should be preparing for this eventuality over the coming years by taking early, proactive steps to ensure their processes are up to speed.”

The Liberal Democrats also said they would require “all large companies listed on UK stock exchanges to set targets consistent with achieving the net zero goal, and to report on their progress”.

The Financial Conduct Authority introduced TCFD reporting rules for listed companies in 2020 on a “comply or explain” basis. These do not include specific targets for emissions reduction.

The state pension age

Elsewhere in the Liberal Democrats’ manifesto, the party also pledged to “ensure that women born in the 1950s are finally treated fairly and properly compensated”.

This is a reference to the increased state pension age for women, which particularly affected women born in the 1950s. Many have argued that the change was unfair and poorly communicated, leading to many women being unaware of the financial impact of the age increase.

The Parliamentary and Health Service Ombudsman has called for those affected to receive compensation and blamed “maladministration” on the part of the Department for Work and Pensions.

The ombudsman’s estimate for the cost of compensation ranged from £3.5bn to £10bn depending on the method chosen.

Pensions Expert has contacted the Liberal Democrats for more information about this manifesto pledge.

Triple lock, gender pensions gap and gig economy workers

The party has promised to retain the triple lock on the state pension – something also supported by the Labour and Conservative parties.

The Liberal Democrats also said they wanted to “give everyone the chance to enjoy a decent retirement” through policies such as “developing measures to end the gender pension gap in private pensions and ensure working-age carers can save properly for retirement”.

The manifesto set out promises to expand access to “flexible, affordable childcare”, increasing statutory maternity pay and expanding shared parental leave.

A recent report into the gender pensions gap from NOW Pensions showed that childcare costs were a significant factor in pay inequality, as high costs often prevented women from returning to work.

The Liberal Democrats also pledged to improve the state pension system by “by investing in helplines to ensure quicker responses to queries and resolution of underpayments”.

For part-time and ‘gig economy’ workers, the party said it would review pension rules so that these people did not “lose out” on the opportunity to save for retirement.

According to the latest YouGov polling data, 11% of voters planned to back the Liberal Democrats on 4 July, putting the party fourth behind Labour, the Conservatives and Reform UK.

Further reading

Ombudsman slamsDWP for ‘maladministration’ over state pension age increases (21 March 2024)

The trouble with the triple lock (29 May 2024)

What does Labour have in store for the pensions industry? (7 February 2024)