To promote more ESG-based investment decisions, Britain’s government will make it easier for the country’s £2 trillion pension plans to divest from oil, gas, and coal companies.
After a consultation period, the new government regulations will bring into effect recommendations made in 2014 and earlier this year by the Law Commissions. The Guardian reports that these regulations are expected to come into effect in 2018.
In the past, pension plans have had issues with fiduciary duties and legal obligations pushing schemes to focus on finding the strongest returns regardless of climate change. According to the Guardian, the regulations will instead allow the plans to “mirror members’ ethical concerns” and “address environmental problems.”
“Putting social value at the heart of our pensions system is something that is deeply important to Theresa May’s government,” Guy Opperman, minister for pensions and financial inclusion, told the Guardian. “Thanks to these new regulations, savers will finally have the clear opportunity to have their say on where their money is invested and can reflect what is personally important to them, whilst delivering mutual benefits.”
The Guardian reports that British pension plans receive roughly £87 billion in contributions per year, with a majority automatically invested into gas and oil companies.
More than 800 institutions, with total investments toppling $6 trillion, have divested from fossil fuels so far.
The earliest companies to implement these new regulations in the UK are likely to be local authority pension schemes. The plans collectively hold £16 billion worth of oil and gas company shares on behalf of 5.3 million English and Welsh employees.