Source · Select Committees · Work and Pensions Committee
Recommendation 12
12
Paragraph: 45
Defined contribution schemes used for automatic enrolment are required to have a default option into...
Recommendation
Defined contribution schemes used for automatic enrolment are required to have a default option into which the member is enrolled, unless they specify an alternative. We recommend that the Government consult on the case for mandating that these default options should align to UK Government climate goals.
Paragraph Reference:
45
Government Response
Acknowledged
HM Government
Acknowledged
The Government understands the intention of this recommendation, though is concerned that mandatory alignment with climate goals might force immediate divestment from high carbon stocks, regardless of whether or not companies are making meaningful progress towards net zero. In this case trustees would be unable to engage and steward companies to lower carbon business practices. To reach net zero, we will need a whole economy transition. Pension schemes as owners and investors have an important role to play in pressing and influencing the companies in their portfolio to set out robust targets and transition plans. The Government considers that proactive and effective stewardship can lead to a reduction in the climate risk in pension scheme portfolios and drive down real-world emissions. This is evidenced by the recent progress noted in response to recommendation 10 and is why we are consulting on new guidance to encourage effective stewardship.34