Green Finance and Pension Funds

I want the UK to become the green finance capital of the world, and the pensions sector must be part of that. Our country’s energy network needs rapid improvement, and transitioning to a high-investment economy will be essential to this.

The Pension Schemes Bill will create bigger, better pension funds that can engage more effectively with companies on environmental and social issues. The consolidation of pension schemes will also enable investment in a wider range of assets, including growth sectors like green projects, and those focused on sustainability and long-term impact.

I was elected on a pledge to mandate UK-regulated financial institutions to develop and implement credible green transition plans that align with the Paris Agreement. I stand by this promise, and I know Ministers are working on a consultation to deliver it. Large pension funds are already required to report on how they are responding to climate risks and making climate-focused investments, and the Government will review these rules, alongside its consultation on new UK Sustainability Reporting Standards. Taken together, these measures will support the environment and improve accountability by helping investors understand how climate and nature-related issues affect their investment choices.

I welcome the Mansion House Accord, which was recently agreed to unlock £50 billion of pensions investment for major infrastructure projects and UK businesses. This will fund clean energy developments across the country. The Pension Schemes Bill will build on this agreement by introducing a reserve power that would allow the Government to require larger pension schemes to invest a set percentage of their portfolios into certain asset classes, like green infrastructure. Together, this will bring greater energy security, lower household bills and put more money into people’s pension pots.

The Great British Energy Act recently passed Parliament to help make Britain a clean energy superpower. This is a significant step forward for Great British Energy (GBE), a new publicly owned renewables company backed by £8.3 billion. The National Wealth Fund was launched last year to unlock more than £70 billion in private capital. It will focus on key sectors like carbon capture, green hydrogen and green steel. The fund will also partner with GBE to combine expertise and investment on homegrown renewable projects.