Member

204: After Clause 117, insert the following new Clause— “Pension investment in social bonds: framework, value for money and market enablement(1) The Secretary of State must, within 12 months of the passing of this Act, prepare and publish an assessment of whether a pension-specific framework should be established to support trustees of occupational pension schemes who wish to invest, where they consider it appropriate, in social bonds and other forms of social infrastructure investment.(2) The assessment must consider the extent to which such a framework could—(a) provide clarity on the application of trustees’ fiduciary duties in relation to social bonds,(b) set out principles for assessing risk, return, liquidity, duration and transparency of such investments, having regard to the long-term nature of pension liabilities,(c) support consistency and comparability in the evaluation of social bonds across schemes, and(d) facilitate trustee confidence and member understanding of such investments.(3) In particular, the Secretary of State must consider whether, and how, the social and economic outcomes associated with social bonds could be reflected within the value for money framework applicable to occupational pension schemes, including—(a) the relevance of long-term economic impacts to member outcomes,(b) the extent to which such investments may mitigate systemic or economy-wide risks material to pension savings, and(c) the presentation of information to members in a clear and proportionate manner.(4) The assessment must also consider how a pension-specific framework could support the development of a credible and investable pipeline of social bond opportunities, including— (a) how public bodies, local authorities, social enterprises or other issuers might bring forward proposals in a form suitable for consideration by pension schemes,(b) the role of standardisation, intermediaries or aggregation vehicles in reducing transaction costs and improving investability, and(c) how such proposals could be assessed on a consistent basis without imposing any obligation on pension schemes to invest.(5) In developing the assessment, the Secretary of State must consider what metrics and evidential standards would be required to ensure that any framework for social bonds is pension-specific, including—(a) metrics relating to long-term risk-adjusted financial performance,(b) alignment with the duration and cash flow characteristics of pension liabilities,(c) the financial materiality of social and economic outcomes to pension savers over time, and(d) the avoidance of reliance on generic or non-financial impact measures not relevant to pension scheme decision-making.(6) Following the assessment, the Secretary of State must—(a) publish the conclusions of the assessment, and(b) where the Secretary of State considers it appropriate, issue statutory guidance or make regulations establishing a pension-specific framework for the prudent assessment, reporting and communication of investments in social bonds.(7) Nothing in this section—(a) requires trustees to invest in social bonds or any other asset class, or(b) alters the requirement that trustees act in the best financial interests of scheme members.”