Lord Sharkey (LD)

My Lords, I will speak to Amendment 170 in my name and those of the noble Baronesses, Lady Bennett, Lady Griffin and Lady Hayman. I am grateful for their support and look forward to hearing their contributions. I have reflected carefully on the helpful feedback I received from the Minister in Committee and, as a result, Amendment 170 does not attempt to mandate pension schemes to exit from any investments. It aims to be helpful in addressing the Minister’s acknowledged concerns about thermal coal investment in particular, and in proposing solutions along the lines she identified. I briefly remind noble Lords of the problems we face. Research by the Finance Innovation Lab, an independent charity jointly established by the Institute of Chartered Accountants and the World Wide Fund for Nature, shows that UK schemes still invest more than £10 billion in companies with significant operations in thermal coal. That is enough to cancel out all the reductions in greenhouse gas emissions achieved by decarbonisation of the grid in the UK since 2019. So, on the one hand, we have the Government phasing out thermal coal at home, cutting off funding by ending export guarantees and encouraging other countries to exit from coal-fired power. On the other hand, we have the Government defaulting savers into pension savings, compelling employers to contribute and providing taxpayer top-ups to pension schemes to invest in thermal coal extraction and coal-fired power in those same countries. The Minister said that the Government “recognise that some pension funds could, and should, be doing more”. She recognised “the high financial and climate risks associated with thermal coal investment”. She welcomed “industry-led reductions in coal exposure”.—[Official Report, 23/2/26; col. GC 290.] and reiterated that the Government “want to see more” of this. The Minister argued that the right levers were “better governance”, for which there are already quite a few duties in law, as well as “better data” and “better transparency”, of which there is currently very little. Indeed, there is so little that, in their October 2025 responses to Written Questions tabled by my honourable friend Manuela Perteghella in the Commons, the Government showed that they really do not have a good handle on the data. The same is true of the Pensions Regulator; in its February 2026 responses to the Minister’s honourable friends Dr Simon Opher and Neil Duncan-Jordan, the responses indicated that neither the DWP nor TPR had carried out an assessment of the level of UK expansion investments in thermal coal or other fossil fuels, the expansion of fossil fuel use or the risks of any of those assets becoming stranded. Our amendment reflects on the Government’s ambition and the current level of insight, and seeks to plug the gap. Subsections (1) to (3) of the proposed new clause focus on the private sector occupational schemes; they make it clear that the proposed duties should be seen in the context of climate risk to savers, not ethics or disapproval. Subsection (2) gives the Secretary of State a duty to collect data or estimates, and publish in an annual report, the amount and change in the amount of relevant assets held by occupational schemes. Proposed new Section 41BB outlines what constitutes a relevant asset. Importantly, neither proposed new section requires government to draft, consult on or table regulations, but it could do this if it wanted to. An obvious disclosure vehicle would be the annual implementation statement published by most pension funds, but a simpler method, less burdensome for the whole industry, would be for Ministers to write annually to some or all the larger schemes and simply request the data. In fact, DWP Ministers have done this before several times, including under a Conservative Administration, in relation to climate risk. As things stand, the Government do not know the level of exposure or the level of risk. Not only do they not know how fast it is declining; they do not really know whether it is declining at all. This amendment would allow government to satisfy itself and to satisfy savers, employers and taxpayers that the amount that pension schemes are putting into thermal coal is going down. It also allows government to provide a nudge, especially to the larger schemes which remain invested in thermal coal and will likely be monitored every year to consider their level of exposure and lower it significantly. Government will be able to set an expectation of thermal coal decline and exit if it is not satisfied that this has been substantially achieved, to consult on what further measures might need to be taken. In the medium term, the issues are not limited to thermal coal, which is why subsection (2) of proposed new Section 41BB gives the Secretary of State a duty to consider whether to expand the range of assets they might request information about, such as hugely destructive and economically marginal activities like tar sands or Arctic drilling, or new issuance by firms expanding or exploring for new fossil fuels. Subsection (3) of the proposed new Section 41BB gives the Secretary of State the power to make regulations to achieve reporting—again, if they wish, through an addition to the implementation statement, but it does not mandate it. Subsection (4) of proposed new Section 41BB makes it clear that we are talking about thermal coal, not coking or metallurgical coal used in steelmaking. Finally, subsection (3) sets out the appropriate oversight provisions. Taken as a whole, this amendment relies on governance, better data and transparency, as the Minister said it should. It would not direct pension scheme investments; it would not impose burdens on smaller schemes. It would be necessary to survey only large and well-resourced schemes to get an estimate of relevant assets, because that is where the money is. It would, however, allow the Government to put a marker down to say, “We are concerned about these investments and we want you to tell us how much you’re investing so we can assess whether there is a problem and what might need to be done”. I know from Committee that the Minister shares my concerns about high-risk investment in thermal coal, and she would like schemes to do more. The amendment identifies a way forward, which I hope meets her tests. It would not prohibit any investments; it would not undermine trustees’ ability to exercise informed judgment or require them to act against the interests of their members; but it would provide the information required to assess the progress, if any, towards the reduction in pension funds’ investments in thermal coal. I look forward to hearing the Minister’s response.