5. Member Debate under Standing Order 11.21(iv): Decarbonising public sector pensions

– in the Senedd at 3:18 pm on 25 May 2022.

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Photo of David Rees David Rees Labour 3:18, 25 May 2022

(Translated)

Item 5 this afternoon is a Member debate under Standing Order 11.21(iv) on decarbonising public sector pensions. I call on Jack Sargeant to move the motion.

(Translated)

Motion NDM7964 Jack Sargeant

Supported by Alun Davies, Buffy Williams, Carolyn Thomas, Cefin Campbell, Heledd Fychan, Jane Dodds, Jayne Bryant, Llyr Gruffydd, Luke Fletcher, Peredur Owen Griffiths, Rhys ab Owen, Sarah Murphy, Vikki Howells

To propose that the Senedd:

1. Notes:

a) that the Welsh Government was the first in the world to declare a climate emergency, recognising the serious threat climate change poses;

b) that public sector pension schemes continue to invest in fossil fuels and, for many years, campaigners have urged schemes to disinvest;

c) that the Welsh pension partnership moved quickly to withdraw investment from Russian holdings and has previously divested from coal, thus demonstrating that it is possible for pension funds to make these decisions;

d) that Members of the Senedd took the initiative to divest their own pension funds from fossil fuels;

e) that if public sector pension schemes in Wales disinvest, Wales would be the first nation in the world to achieve this, demonstrating to fund providers the need to create fossil fuel free investment products.

2. Calls on the Welsh Government to work with the public sector to agree a strategy to decarbonise pensions by 2030, thus bringing them into line with current public sector net-zero targets.

(Translated)

Motion moved.

Photo of Jack Sargeant Jack Sargeant Labour 3:18, 25 May 2022

Diolch yn fawr, Deputy Presiding Officer.

Ideas often have their moment, a moment when the evidence for action becomes overwhelming. Dedicated campaigners have chipped away for years on pension fund disinvestment; it is now time for Governments across the globe to join the fight. I believe it's also time for Wales to take centre stage and lead the world on ending public sector pension fund investment in fossil fuels, and in so doing, igniting a new era of investment in the future of our planet, sustainable energy, and transport.

As many of my colleagues know, I have been working with Friends of the Earth Cymru for some time now on the campaign that is the subject of today's motion: for the Welsh Government to bring in targets for public sector pension fund disinvestment. The motion calls on the Welsh Government to mirror its 2030 target for the public sector to go carbon neutral with a target for public sector pension funds to achieve the same. This would mean that the public sector and its investments would be genuinely carbon neutral by 2030.

Photo of Jack Sargeant Jack Sargeant Labour 3:20, 25 May 2022

Deputy Presiding Officer, I'd like to put on the record my thanks to our bold First Minister, Mark Drakeford, who has given me much support and encouragement on this issue. Just last month, I held a cross-party event on this matter, and it was the Prif Weinidog who ensured that a senior Welsh Government official attended and contributed to what was an excellent discussion.

So, let's ask ourselves: why are we debating the seemingly dry subject of public sector pensions, and why am I excited by the opportunity they present to us? Well, the first reason we are doing this is because humanity faces catastrophe. That catastrophe is in the form of global warming. Global warming is caused by the use of fossil fuels, and we know that we have a very short window of opportunity to avert that catastrophe.

Pension funds are huge investors, and stopping them from investing in fossil fuels as quickly as possible is a must if we are to stop global temperature rises that will risk the very future of the human race. Now, coupled with the risk of climate change is the fact that fossil fuels are often imported from dictatorships, many of whom are serious destabilisers in global affairs. They are undemocratic regimes that promote values that we find abhorrent, and we should not continue to invest in them. Fossil fuels are also finite and the price of them fluctuates massively. Disinvestment is inevitable in the long term, but for the reasons I've already stated today, we should look to accelerate that process, as has already happened with pension fund investment in coal.

There is a well-established myth that markets and investment funds should be left to their own devices—their own devices to achieve the best financial returns possible. But the reality is that this never happens. All sorts of actors across the globe constantly interfere with markets and pension fund investment decisions. What this disinvestment campaign is saying is that one of those actors should be us, seeking to include, as an investment criteria, long-term sustainability.

We have seen, haven't we, just recently, that public sector fund managers can move remarkably quickly to remove investments that promote risk to human life? On this very occasion, it was the removal of pension fund investments in Russia, following their illegal invasion of Ukraine. Nobody across the Chamber could argue that this wasn't the right thing to do.

Deputy Presiding Officer, one of the strangest facts around whether pension funds invest in fossil fuels is their lack of willingness to involve those who pay into them in the decision-making process about where they invest. Now, I have no doubt that the vast majority of investors support the decision not to invest in coal, and they support the decision not to invest in Russia. And I believe that they would also support the decision for public sector pension funds to go carbon neutral at the same time as the rest of the public sector, by disinvesting from fossil fuels.

Being a genuine democrat and wanting to empower the people of Wales, I would go even further. I would ask them to be involved in forming a new investment plan—a plan that gives them the returns and improves the places where they live. There is, as I said, a real opportunity here to get pension schemes to invest in infrastructure in Wales. There is plenty of opportunity for investment returns here, and it could drive the creation of home-grown renewable energy, the building of social housing—a great investment because of the guaranteed rent returns—and carbon-neutral public transport. Just those opportunities alone would create highly skilled, high-paid jobs whilst investing in the future of our local communities. It is in the interest of Wales and the rest of the UK that we increase our levels of energy security, and it is about promoting home-grown energy production. And it is in all of our interests that the public sector goes fully carbon neutral by 2030.

Deputy Presiding Officer, today's debate is an opportunity for the Welsh Government to once again show the sort of bold leadership that saw us become the first nation in the world to declare a climate emergency, and to build on the well-being of future generations into legislation. The Deputy Presiding Officer knows that, at heart, I am an optimist and I know, in this Senedd Chamber, we take the averting of climate catastrophe as seriously as it needs to be taken. So, I commend this motion to the Senedd Chamber today, and I would urge all of you, cross party, to support this motion and join me in the campaign for pension fund disinvestment and urge the Welsh Government to act now. Diolch yn fawr.

Photo of Peter Fox Peter Fox Conservative 3:25, 25 May 2022

Can I thank the Member for Alyn and Deeside for bringing forward this very interesting debate today? Before I begin, I'd like to confirm that the Welsh Conservative group will be abstaining on the motion before us today.

This is not because we don't agree with the premise of the motion. It's important, if we're to meet our climate change commitments, that we continue to move away from our reliance on fossil fuels, not just to power our cars and fuel our homes, but also to support our public finances. Of course, investing pension funds into things like fossil fuel companies has been standard practice for some time. It's not just the public sector pension funds that have been used in this way, but many private sector pension funds also. So, it's about time that we start looking at different and innovative ways of investing public funds into socially and environmentally responsible initiatives.

And so, it is in this regard that I'm pleased that the local government Wales Pension Partnership announced a new decarbonisation initiative across £2.5 billion of its investments in April last year. It's also welcome that the partnership has developed a climate risk policy with an ambition to report on progress towards reducing exposure to carbon-intensive investments. Councils and local authority pension funds have also made good progress in decarbonising their investments. For example, back in 2018, Monmouthshire County Council, when it was under Conservative leadership, agreed to ask Gwent pensions fund to disinvest in fossil fuels. Deputy Llywydd, there has been a wealth of good work by councils here in Wales on this agenda, but I absolutely agree that there needs to be more done.

However—and going back to why we are abstaining from today's motion—what I would just caution is that any disinvestment may result in some unintended consequences for the values of people's hard-won pensions. The latest statistics show that over £500 million-worth of pension funding is currently locked up in such companies. And so, we need to be careful as to how this is managed and it's important that all pension trustees have the independence to do what is best for their fund, as well as to use their knowledge to ensure that any shift in funding strategy has a minimal impact on investment returns. However, in saying this, I do believe that public bodies in Wales should be encouraged to ensure that any investments made by their individual pension schemes are environmentally and socially responsible, as well as meeting the needs of their members. Diolch.  

Photo of Cefin Campbell Cefin Campbell Plaid Cymru 3:28, 25 May 2022

(Translated)

Thank you very much, Diprwy Lywydd, and I'd like to thank Jack Sargeant for introducing this important debate this afternoon. I’d like to begin by echoing some of the words spoken by the young people of Wales in the Urdd's message of peace and goodwill last week:

'The clock is ticking and our world is on fire'.

Indeed, in this powerful statement by our young people, we were all reminded of the serious threat that the climate crisis poses to our world and to our way of life, and the environmental, ecological and humanitarian crises that are likely to occur if we, as those who have the power to effect change, don't take urgent steps to save our planet.

As part of turning words into actions, we could start by looking at the investment policies of some of our public sector pensions to see how much of these investments are still in fossil fuels, such as oil, gas and coal. This continues to be a wholly irresponsible policy as we face a climate crisis. And I agree with Jack that Wales has a golden opportunity here to be in the vanguard of investing in funds that are greener and more sustainable. Without action, by the time a number of our younger generation—the children of the Urdd—are old enough to benefit from their pension funds, the environmental destruction will have continued, with the ice caps having long since melted, our food chain broken, and extreme weather being the norm.

Recent data from Friends of the Earth, for example, show that in Wales over £550 million out of a total of £17 billion of local government pension funds has been invested in fossil fuel. This equates to around 3.2 per cent of these schemes' value, which is higher than the percentages in England and Scotland. This is equivalent to every single person in Wales investing £175 in the energy sector that is most harmful to the environment. In my region of Mid and West Wales, the picture is even more striking, with almost 5 per cent of Dyfed’s pension fund invested in fossil fuels. Believe it or not, this is the second highest percentage in all nations of the United Kingdom, from all of the pension funds.

We know already that a number of councils have taken deliberate steps to try to tackle the climate crisis. It's frustrating, therefore, that our public sector pension funds are continuing to invest in carbon fuel corporations. But more than that, not only is supporting an unsustainable energy sector a dubious step, it is also economic folly. With international efforts to decarbonise having gathered pace, it is increasingly clear, as Mark Carney, the former governor of the Bank of England, has warned, that the current carbon bubble is not fiscally sustainable in the long term. So, without divestment in favour of greener sources, our public sector pension funds could be at a disadvantage very soon.

I welcome the efforts, therefore, that have been made by county councils, including Carmarthenshire and Ceredigion, and the work of other organisations, such as Divest Dyfed, which have been in the vanguard in calling for change at Dyfed pension fund to invest more in clean energy companies. And as has been mentioned by Jack Sargeant already, the Ukraine crisis, and the decision to withdraw investment from Russia, has demonstrated that robust, principled and united action by the pension authorities is possible in the face of a crisis. So, it is a responsibility and a duty on all of us now to ensure that this kind of goodwill and certainty is repeated in light of the climate crisis, and to ensure that real steps are taken to decarbonise public sector pensions in Wales for the benefit of future generations.

Photo of Vikki Howells Vikki Howells Labour 3:33, 25 May 2022

Thank you to my colleague Jack Sargeant for tabling today's motion on pensions divestment. I'm really pleased to speak in support of this important issue, and indeed it's something I've long agreed is essential. For example, I hosted a drop-in with Friends of the Earth Cymru for Senedd Members a few years ago, and the specific purpose of this was to generate consensus behind divesting the then Assembly Member pension scheme. I was delighted when the pension board agreed to do this at the start of 2020, and I'd like to thank Members of the board for delivering on this important issue.

This was a really important step, as we put our money where our mouth is. I believe we were the first UK Parliament pension scheme to take this action to commit to invest in our pension scheme in a sustainable and ethical manner. But this was an intervention that was no less important symbolically, as we sent a clear sign that pensions can be and should be divested. Rightly, the focus of our Welsh Government, and much of our public sector, has been on our response to the coronavirus pandemic in the time since, but we cannot lose sight of a climate emergency that is no less critical. And as this motion argues, now is the time for Welsh Government and our public sector to agree a strategy to decarbonise pensions by 2030.

A report published last year under the aegis of grass-roots movement UK Divest gives a stark picture of the scale of council investment in coal, oil and gas. Many of these figures were on a UK basis. However, Welsh local government pensions were noted to have invested £538 million in fossil fuels, which works out at just over 3.2 per cent of the total value of the schemes. No Welsh pension fund is amongst the top 10 highest investors in fossil fuels, but one, Dyfed, as was previously noted by my colleague Cefin Campbell, was the second highest investor as a proportion of their fund's total value. Just under 5 per cent of their fund was invested in fossil fuels. 

Another important point is that, in these funds invested in fossil fuels, £2 out of every £5 are invested in just three companies—that's BP, Royal Dutch Shell and BHP. Familiar names, but also companies that have been identified as making massive profits from oil and gas. For example, Shell boasted profits of over $9 billion in just the first quarter of 2022, and that was three times the value from the same period the previous year. These are companies that are harming our environment, profiting from global destruction, and making their shareholders rich while squeezing ever more tightly the people we represent as household energy bills rise exponentially. It's important that we divest from an environmental perspective, but it's equally important that we do so from an ethical perspective too. And if we can deliver this, not only our Welsh Parliament, but our country as a whole, will be taking an important lead. 

Photo of Gareth Davies Gareth Davies Conservative 3:36, 25 May 2022

I want to thank Jack Sargeant for tabling this important debate this afternoon. I don't totally agree with the entire premise of the motion, but it's still important, at the same time, that we have the debate. I will say from the outset that decarbonisation should be our number one priority, as we're in the middle of a climate emergency, and my constituents are already suffering the effects of rising global temperatures. However, I don't believe that taking the action suggested in the motion before us will do anything to address climate change. If we are not careful, we will end up making an empty gesture that does little other than to harm our poorest public sector workers. If we stop pension funds from investing in some of the most profitable businesses in the UK, we are going to severely restrict the growth of those funds and diminish the pensions of some of our lowest paid workers—our social care staff, our NHS staff, the cooks and cleaners in our schools and day care centres, and the tens of thousands of other council employees and hospital staff who provide a valuable service to each and every one of us here. 

We are blessed. We can afford to pay a little extra to save a little extra. They can't. You also have to ask yourself what we will achieve by banning investment in the likes of BP and Shell. Will we force them to change their ways? I don't think so. They are doing that themselves. These oil and gas companies are some of the biggest investors in renewables. BP has just partnered with Abu Dhabi energy firms ADNOC and Masdar to decarbonise UK and United Arab Emirates energy and transportation systems. They are pumping billions into green hydrogen in an effort to enable the decarbonisation of hard-to-abate industries such as steel production. They have also become a leading partner in the Global Centre for Maritime Decarbonisation, as shipping is one of the biggest contributors to global carbon emissions. This move should be applauded not punished. Let's encourage pension fund managers to invest in profitable companies that are actively seeking to decarbonise rather than ignoring them because they are currently just a fossil fuel industry. 

Should these large multinationals and global corporations be more ethical? Absolutely, yes. But we won't effect change by restricting our pension funds. I don't hear anyone calling for pension funds to divest from the likes of Nestlé or Apple. Apple are using forced labour in China and anti-competitive practices around the globe to become the world's richest corporation. [Interruption.] We don't see people jumping up and down about that, do we, Llyr? So, let's take more of a measured approach. We can work together to encourage change, but we won't force it by impoverishing public sector funds. I urge Members to abstain on the motion this afternoon. Thank you very much. 

Photo of Heledd Fychan Heledd Fychan Plaid Cymru 3:39, 25 May 2022

Thank you very much. I have to say, Jack, I disagree with one thing you said. I don't find this dull; I find this extremely interesting, because, actually, pensions affect all of us. One constituent wrote to me, 'It makes little sense to worry about the financial viability of a pension I can access in 32 years' time when current projections place my house, here in Cardiff, underwater by 2050, and I will face a future of food shortages, more extreme weather events and increased risk of death from high temperatures.' So, that's what we are talking about now: taking real action. What Gareth Davies was saying I cannot comprehend. It's almost an argument for doing nothing. [Interruption.] No, a debate you base on facts. I heard very few facts there. One thing I do agree with: it does go beyond fossil fuels. We should be looking at ethical pension schemes, which include the arms trade, tobacco and so on. This is a climate emergency. [Interruption.] I will, of course, take an intervention. 

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru 3:40, 25 May 2022

As the Member for the Vale of Clwyd wouldn't take an intervention, I'll make the point that I was going to make then. One of the positives that could come out of disinvesting in this way would be to persuade those companies that have traditionally made their profits from fossil fuels to change direction. It is about persuading them to work in an ethical way by saying, 'We'll invest in that part of your business, but time is up on that'. 

Photo of Heledd Fychan Heledd Fychan Plaid Cymru 3:41, 25 May 2022

I could not agree more with my colleague there. I think Jack was right in the motion to note progress in relation to our own pension funds as Senedd Members, but it may be surprising to some Members here today that the same is not true for our staff. In fact, it is an issue one of the members of my team has been trying to get to the bottom of since starting with me. The person had, in fact, turned down a job offer with a local authority because they were unable to offer them an environmental, social and governance pension, and agreed to a role in my team because they were under the impression that the Senedd pension scheme included auto-enrolment into an ESG scheme. However, having now gone through the pensions enrolment process, the person was disappointed to learn the following: that staff are not auto-enrolled into the scheme, they're not made aware that there is an option to go into the scheme— 

Photo of David Rees David Rees Labour 3:42, 25 May 2022

Heledd, would you take an intervention? I've got a request for an intervention from Mark Isherwood. 

Photo of Heledd Fychan Heledd Fychan Plaid Cymru

No, thank you. Staff can enrol themselves—[Interruption.] You didn't take an intervention from me, so, please—

Photo of David Rees David Rees Labour

Don't respond to him. You don't need to. [Interruption.] 

Photo of Heledd Fychan Heledd Fychan Plaid Cymru

May I continue, please? Thank you. Staff can enrol themselves into an ESG option available, but need to know which questions to ask. My team member has now been provided with the details—[Interruption.] May I speak, please? Thank you—of the pension fund manager so that this can be followed up. However, and I quote, my team member told me, 'As a member of staff, I find that I am having to do most of the legwork of getting to the bottom of finding out just where my new work-based pension is being invested.' I think there's a lesson for us all in this, in ensuring that we make it as easy as possible for our own staff, as well as the wider public sector, to ensure that their pension is an ethical one. After all, shouldn't this be an opt-out rather than an opt-in going forwards? 

And why is it important? Not only is it the right thing to do ethically, but it is also right we do it for the future of our planet. I'm grateful to all of my constituents that have contacted me on this matter and shared with me research undertaken by Aviva with Route2, in association with Make My Money Matter, and as part of Aviva's partnership with WWF UK. It found that moving the national average pension wealth to the sustainable fund using their calculation is 21 times more effective than the combined annual carbon savings of switching to renewable electricity providers, substituting all air travel with rail travel, and adopting a vegetarian diet. 

My constituents who feel strongly about this rightly also feel that setting a 2030 target is not good enough and that this change should be made now. After all, we saw during the height of the pandemic things that were previously deemed impossible become possible, and international co-operation reflective of the urgency. Yet, when it comes to the climate and nature emergency, and as we saw at COP26, we continue to see a reluctance to act, despite the situation our planet faces. We shouldn't take what fossil fuel companies are telling us at face value. I'm sure many of you saw Caroline Dennett's explosive resignation working as a senior safety consultant with Shell, accusing the fossil fuel producer of causing extreme harms to the environment, and stating:

'I can no longer work for a company that ignores all the alarms and dismisses the risks of climate change and ecological collapse because, contrary to Shell’s public expressions around net zero, they are not winding down on oil and gas, but planning to explore and extract much more.'

We must do this. It's not an option. We are able to do it here in Wales in terms of our public sector pensions. We are told time and time again that it is too complicated, but, as was illustrated by Cefin Campbell, future generations demand this of us. Otherwise, there will be no point to them having any sort of pension fund.

Photo of David Rees David Rees Labour 3:45, 25 May 2022

Before I move on, can I just simply remind all Members that every Member is entitled to make a request for intervention, but the Member speaking has every right to either accept or reject that request? I would encourage Members not to actually respond to comments from sedentary positions, because it allows you to continue your flow of speech naturally. Sarah Murphy.

Photo of Sarah Murphy Sarah Murphy Labour

Diolch. I want to thank Jack Sargeant for bringing this motion to the Chamber today. Our Welsh Government was one of the first in the world to declare a climate emergency, and it was groundbreaking. I remember hearing the announcement and thinking of all those across our communities who have adapted to recycling their waste, cycling to work, walking to work to mitigate air pollution, schoolchildren who are using reusable water bottles to reduce plastic consumption. These acts are not in vain when we have a Government that acknowledges the science. In Wales we have a Government that knows that we have to act now. Before the pandemic, I was also proud to stand alongside young people across Wales, but in particular of course those from Bridgend, who came down and marched with the youth strikes for climate. They used to come and sit on the steps of the Senedd on a monthly basis and give incredible speeches.

Sea levels are rising, there are changes to the weather that are impacting our farmers, climate change is impacting our biodiversity and wildlife. So, declaring a climate emergency is not just about identifying the threat here in Wales, now we have to set an example and actually do things differently. This includes collaboration between countries working together to create sustainable living, collaboration of priorities that ensure that the most vulnerable do not suffer, collaboration between Governments and its people where residents play their part in return for our Government also working to tackle the impact of climate change. The motion today brings about these very same principles. Again, this is not about imposing this on the public sector either. It says very clearly in this motion that this is about collaboration between the Welsh Government and the public sector, and it is to reach targets that are already there in place to have a net zero public sector by 2030. People need that assurance from their Government and their public sector that they're doing things that are in their best interest and the best interest of the planet. 

The public sector pension scheme is an investment to ensure that their future is one of financial security for people once they are no longer in work. A scheme that invests in fossil fuels, contributing to the destruction of the planet, contradicts the very security the pension aims to create. From industries to local businesses to residents and schoolchildren, we are all looking at new ways of sustainable living that centre around protecting our planet. Divesting from the scheme would be another example of how Wales is leading on environmental protection, and it's also the right thing to do for the collective interest. It would also make us the first nation in the world to do so. That would be absolutely incredible. Don't we all want to be part of a nation and a Government that can do that?

So, I stand fully with this motion today. We can no longer focus on maximising economic growth and GDP over putting societal and environmental benefits at the heart of our decision making. We must reinvest energy from damaging practices such as funding oil and gas into innovative, collaborative and transparent policies that put people and the planet before profit.

Photo of Carolyn Thomas Carolyn Thomas Labour 3:48, 25 May 2022

I would like to thank Jack for bringing this important debate to the Senedd and for the excellent campaign he has been doing alongside Friends of the Earth Cymru to get this issue talked about. 

In this Chamber I have spoken before about Thatcherite policies for which Wales and the UK continue to pay the price, whether that be the housing crisis or disastrous bus deregulation—pensions are another to add to this list. In the 1980s the Thatcher Government discouraged what they called dependency on state benefits, and instead incentivised a shift to greater levels of private pension provision. It unleashed the personal pension—. Sorry, I wasn't expecting to be called. Very sorry. 

In the 1980s the Thatcher Government discouraged what they called dependency on state benefits, and instead incentivised a shift to greater levels of private pension provision. It unleashed the personal pension misselling scandal, whereby armies of commission-driven salesmen were paid to convince the public that they should ditch their final salary occupation schemes in favour of the riskier personal pensions. This led to a huge number of pensions being controlled by private asset managers, and has remained the status quo ever since. Instead of leaving pension funds in the hands of the private sector, they should be managed democratically and in the public interest. Nowhere is that more necessary than in relation to pension fund investments in fossil fuels, and currently public sector pension funds in Wales are acting as a power source for further climate destruction. Not only do these funds fuel the climate crisis, but they also represent bad investments. Any green transition worthy of the name will need to include the targeted decline of reliance on fossil fuels, which will result in significant devaluation of fossil fuel investments, increasing the risk of current pension funds.

Pensions are designed to provide workers with security when they retire. Continuing to invest pension funds in destructive fossil fuels does exactly the opposite, much like the climate crisis itself. These investments are ticking time bombs, and it doesn't have to be like this. Imagine a system under which public sector pension funds are ploughed into a green new deal, and instead of funding the destruction of the planet, we could be funding the saving of it. We could use this investment for social and environmental good, investing in well-paid, unionised jobs in the sustainable industries of the future. The time for serious action on climate change has long since passed. Here in Wales we have already shown our willingness to take the lead on environmental issues by declaring a climate emergency in 2019. And as Jack's motion specifies, Wales can lead the way again. We can become the first nation in the world to fully divest public sector pension schemes, and we must continue to back our words with serious action. Divestment is needed, and it's needed now. Thank you.

Photo of David Rees David Rees Labour 3:51, 25 May 2022

(Translated)

I call on the Minister for Finance and Local Government,  Rebecca Evans.

Photo of Rebecca Evans Rebecca Evans Labour

Thank you, and thank you to Jack Sargeant for bringing forward this debate today. It definitely hasn't been a dry debate, it's been more lively than I think any of us had anticipated, but really useful as well.

It is absolutely clear that net zero has to be a shared ambition for us across the Senedd, across Welsh Government and across the Welsh public sector more widely, and we've discussed many times in this Chamber how climate change is the biggest challenge that we face and how we need to act and act now.

The Welsh Government supports the ambitions set out in the motion to decarbonise those public sector pension schemes that are funded through investments. So, this covers the local government pension scheme and schemes for the Arts Council of Wales, National Museum Wales and the National Library of Wales, and, of course, our own scheme for Senedd Members.

The local government pension scheme is the largest of these, and this provides the pensions of nearly 400,000 members in Wales. Of course, it's not as simple as voting today to divest specific funds. Our pension funds, like the rest of the system, must respond fully to the climate and nature emergency. And we have set out, in law, our target to reach net zero by 2050, and, of course, the ambition for the public sector in Wales is net zero by 2030. To do this, public sector pensions, like others, must develop a coherent understanding of the current and historic emissions inherent in their investments. They need to identify positive opportunities to invest in developments that support the shift to the decarbonised world. They need to understand and respond to the financial risks that the climate emergency brings.

Photo of David Rees David Rees Labour 3:53, 25 May 2022

Minister, I have a request for an intervention from Mark Isherwood.

Photo of Rebecca Evans Rebecca Evans Labour

If I just finish this section, and then I will happily take the intervention. They also must respond transparently and must develop credible transition plans to net zero, and, of course, they have to work closely with those who've contributed to the funds, including the workers and their trade unions, to ensure that they're engaged and fully consulted in any future approach—a point that was made very strongly by Jack Sargeant. I'm happy to take the intervention.

Photo of Mark Isherwood Mark Isherwood Conservative

Diolch. Thank you very much indeed. I'm sure we all share the same goals. The world passed peak oil production a few years ago, and the world is running out of fossil fuels, whether we love them or hate them, and therefore we've only got a few years to put an alternative energy system in place, but the technology is not fully there yet. How do you respond to the evidence that without fossil fuel back-up providing energy security during the transition period, potentially hundreds of millions or billions of people could die?

Photo of Rebecca Evans Rebecca Evans Labour 3:54, 25 May 2022

I think the point here is about transitioning investment towards those technologies, which we do need for the future, and if we don't invest in that technology and the innovation, then we'll be waiting forever for the alternatives to fossil fuels to arrive. So, investment in those alternatives and in the innovation and the research to find those alternatives will be absolutely critical. And I don't think that any of us would really argue against that point.

As one pension manager noted, setting a long-term net zero target is the easy part; the challenge is to have that credible and transparent framework that enables your fund to convert that intent into practical decisions and actions. I think that speaks to Mark Isherwood's concern.

But, of course, it's really important to be very clear on this that there are no powers for Welsh Ministers to direct public sector pension scheme authorities or trustees to invest or not to invest in certain ways. The responsibility for looking after the best interests of the funds' members does lie with the pension trustees, elected members and the officers and managers of each fund, and the best interests of their members clearly include securing good returns, but equally it means responding—responding to the wishes of members and responding to the financial risks posed by climate change, and playing their part, also, in ensuring that there's a habitable planet for future generations to enjoy their retirement, as so many Members have said in the debate this afternoon.

So, the Government's role, I think, is to work with pension authorities across the public sector. It's about convening those discussions and ensuring that there's shared learning so that we can be sure that they are recognising the risks and the opportunities that the climate emergency brings. It's about supporting best practice and reducing barriers and also encouraging ambition and pace where they're needed.

While I'm not here to explain the actions of the pension authorities and the trustees, I do think that they are responding to the issue. The local government pension scheme pool has a climate change policy and a responsible investment policy, and also a low-carbon fund that excludes companies that rely on coal to generate revenues. They've also introduced independent environmental, social and governance and climate risk reports, and the Welsh local government pension funds have transitioned the majority of their passive investments into low-carbon tracker funds. The Senedd Members' pension has committed to transition investments away from fossil fuels. And I've already met with members of the local government pension authorities and we did agree to discuss with local government leaders at the statutory partnership council, as part of our ongoing focus on responding to climate change, this particular issue.

Of course we want to see ambitious, faster action on this agenda, and in Wales we do have opportunities for pension funds to invest as we scale up the deployment of renewable energy. We're setting up a public renewable energy development function that will be seeking investment to deliver renewable energy projects in a way that maximises the economic and the social value to Wales. So, we want to work with pension funds in Wales to explore the opportunity to link that development in Wales with investment from Wales, and this isn't an area where Welsh Government can mandate a change. If we do want to change, we have to help make that happen, and it has to be through that collaborative partnership approach. But Welsh Government does have a vital leadership, support and facilitation role. We need to work jointly with partners in local government and across the public sector, including our trade unions, on what is, after all, as I said at the start, a shared ambition. So, I support the motion to work with the public sector to agree a strategy to decarbonise pensions by 2030. Diolch.

Photo of David Rees David Rees Labour 3:58, 25 May 2022

(Translated)

I call on Jack Sargeant to reply to the debate.

Photo of Jack Sargeant Jack Sargeant Labour

I'm grateful, Deputy Presiding Officer, for Members' contributions to this debate and the positive contributions from most Members of the Chamber this afternoon. I will start, Presiding Officer, in summing up—I'm not sure if the Member for the Vale of Clwyd had his Shreddies these this morning, or his Denbigh plum, but certainly I disagree with the majority of his contribution. But I do welcome his intention to abstain and the contribution that he did make this afternoon.

But I am determined, Deputy Presiding Officer, that this motion will be passed in this Senedd Chamber today, and we will demonstrate that Wales's national Parliament wants our public sector to be truly carbon neutral by 2030. I thank Members for their positive engagement, but also the work that they've done in previous years. I know Jenny Rathbone and Mike Hedges worked alongside, and Vikki Howells mentioned in her contribution our Members, when we were Assembly Members, our own pension funds and the work they've done successfully there. But Heledd Fychan mentioned something that really needs to be looked at by all Members of the Chamber when it comes to our support staff and their pensions scheme, and I would urge the Commission to also take note of that.

But, Deputy Presiding Officer, for the rest of the public sector to go carbon neutral and then for the public sector pension funds to invest in fossil fuel extraction would seem quite ridiculous. As Carolyn Thomas has said, we would be funding to save the planet if we did this right.

I also want to pay tribute here, in closing, to all the campaigners that have been working hard on this issue for many, many years. This debate today is about showing that real leadership from Welsh Government and sending a message to pension funds investors that there is a need for collaboration and there is a need to disinvest, and the future is not in fossil fuels.

As has been said in this Chamber, pension funds disinvested from Russia in a matter of days. I welcome Peter Fox's remarks and also recognise the good work, as Cefin Campbell has, of councils across Wales already. But this is about it being standardised across the whole of Wales. And, of course, Peter Fox mentioned the unintended consequences that might come with this. Well, we are giving them eight years to do this with a 2030 target, and it's that collaboration with Welsh Government to have those conversations, like the Minister said, with our colleagues and our trade unions to make sure there are no unintended consequences from any shift in this direction. But we are giving them eight years.

I want to just reflect on young people, our future generations, from the Bridgend youth strike for climate and those young people that Cefin Campbell described. The clock is ticking on this; we really do need to get moving, otherwise there will be no point in having pensions in the future anyway.

Presiding Officer, I'll end here by saying one thing, finally. This is a real opportunity to invest in the future of Wales, in our communities and its infrastructure. We cannot solve the climate emergency alone, but we can disinvest in our public sector pension funds, and, if we do so, Wales will be the first nation in the world to do that, and it will show that real, bold leadership to the rest of the world. Diolch yn fawr.

Photo of David Rees David Rees Labour 4:01, 25 May 2022

(Translated)

The proposal is to agree the motion. Does any Member object? [Objection.] Yes. I will defer voting on the motion until voting time.

(Translated)

Voting deferred until voting time.