I appreciate there is a growing global divestment movement, with various individuals and organisations pledging to divest from the fossil fuels that are causing climate change. I note that globally, institutions with an approximate value of $5.4 trillion have committed to reduce their exposure to high-carbon investments, which risk becoming obsolete as the world transitions to a low-carbon economy.
I agree that this is an important issue. While the risks that climate change poses to our financial systems are clearer than ever, these systems are only just beginning to focus on that threat. I note that the Task Force on Climate-related Financial Disclosures (TCFD), which was set up by the international Financial Stability Board, has recently called on companies to include in their financial reports a discussion of the impact of climate change on their businesses. I believe financial institutions must respond responsibly to the TCFD's recommendations. Stock exchanges and regulators should commit to proper reporting and transparency on climate change as part of their disclosure procedures.
Regarding the Parliamentary Contributory Pension Fund (PCPF) specifically, the fund is administered by a board of trustees which has a duty to make investment decisions in the best long-term interests of the fund's members. During the last Parliament, the trustees stated that they had received legal advice that excluding a sector would be incompatible with their legal and fiduciary duties of investment. However, the Trustees have now accepted that climate change may present a financial risk to the fund's investments. I note that in 2015 guidance from the Pensions Regulator clarified that trustees should take account of environmental factors where they may be financially material, while in December a legal opinion from two leading UK barristers concluded that pension fund trustees who fail to consider climate risk could be exposing themselves to legal challenge.
I hope that the PCPF Trustees will take account of these developments. I can assure constituents that I will continue to monitor this issue and support a low-carbon economy in the UK.