ShareAction has published proposals for a Responsible Investment Bill to be presented to MPs in collaboration with the All Party Parliamentary Group (APPG) on Sustainable Finance.

The proposed bill would stipulate in law that ‘best interests’ include environmental and social considerations in a bid to strengthen the legal duties of fiduciary investors, primarily pension trustees and their asset managers, to act in the best interests of beneficiaries.

It would also force investors to give greater attention to their climate impacts by requiring any default funds and any funds marketed as sustainable to align with the Paris Agreement goal of limiting climate change to below 2°C.

If enacted, supervising compliance would be undertaken by both the Financial Conduct Authority and The Pensions Regulator, mirroring the recent steps taken by the Swiss and Dutch governments.

The bill has also drawn inspiration from Sweden and Norway in its recommendation for a UK Council for Investor Due Diligence regarding human rights and the environment.

This council would be responsible for researching company practices and issuing alerts and recommendations to investors, who would in turn, be required to respond within 60 days to explain how they intend to mitigate or avoid complicity in serious violations of human rights or environmental crimes by investee companies.

In addition to this, the bill includes provisions designed to improve transparency and accountability of pension trustees to their beneficiaries.

In particular, the proposed bill states that transparency in the pensions sector has failed to keep pace with improvements in technology and customer experience seen elsewhere, setting out clear duties for fiduciary investors to understand their beneficiaries’ views and to respond to their reasonable requests for information in light of this.

It also addresses enforcement, noting that one of the weaknesses of the directors’ duties introduced under the Companies Act 2006 is the lack of enforcement powers where directors have fallen below a reasonable standard, with the new bill providing enforcement powers through judicial redress for beneficiaries.

The bill has already been supported by some parliamentarians, with APPG chair and Leader of the Liberal Democrats, Sir Ed Davey, highlighting it as a "clear pathway" to achieve climate commitments.

He stated: “Government and regulatory action are needed to help us achieve our international climate commitments and to place the financial services sector on a more sustainable footing.

“This bill represents a clear pathway to achieving that aim and I look forward to supporting it over the coming months and years."

Following today's presentation to MPs, ShareAction is expected to work alongside members of all parties, particularly those on the APPG on sustainable finance, as well as allies in civil society, to build broader backing for the introduction for the bill before the end of the current parliament.

ShareAction chief executive, Catherine Howarth, added: “We can and must ensure that the UK’s mighty investment industry does more to meet the long-term needs of ordinary savers, whilst avoiding investment decisions that cause grave environmental harm or violate human rights.

“This bill will make powerful institutional investors accountable and transparent about the decisions they make on behalf of so many of us.

“We commend it to every MP and look forward to engaging with the government on the big ideas it contains.”

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