To ask Her Majesty’s Government what steps they are taking to encourage oil and gas companies to link executive pay to carbon emission reduction targets.
My Lords, the Government welcome the announcement by Shell that executive pay will be linked to carbon reduction targets. While executive pay is a matter for the company’s shareholders, the Government have given shareholders new powers to hold companies to account on pay, including a binding vote on the directors’ remuneration policy.
My Lords, I thank the Minister for his Answer and I agree that the announcement this week by Royal Dutch Shell is to be welcomed, though it has come after years of investor pressure, not least from the Church Commissioners and the Church of England Pensions Board. Her Majesty’s Government have stated their support for the Task Force on Climate-Related Financial Disclosures. Can the Minister tell us what practical things Her Majesty’s Government are doing to encourage that, and in particular what assessment they have made of whether it should become compulsory?
My Lords, we believe that it is important that executive pay should be a matter for the companies involved. That is why we leave it to them and why we have given powers to shareholders in the Enterprise and Regulatory Reform Act 2013 to insist, as I said in my original Answer, that they have a binding vote on directors’ remuneration policy. In striving to meet carbon reduction targets, the Government will continue to encourage others to do the same, but that must be a matter for the companies.
My Lords, does my noble friend agree that this is not just about the principle of executive pay, but that we should all be committed to reducing carbon emissions? How does my noble friend square the fact that if fracking continues in the United Kingdom, we will increase our greenhouse gas emissions and therefore create more carbon emissions?
My Lords, I do not agree with my noble friend. I believe that there is a very strong case for encouraging shale gas extraction not only in terms of energy security but also in terms of reducing our carbon emissions. It will lead to less use of other, more harmful sources of energy. It can play a role in both reducing carbon and increasing our energy security.
My Lords, I was delighted to learn that the Government have carbon targets for their whole estate under their Greening Government Commitments. Does the Minister agree that, given his welcome for this scheme, Secretaries of State should have their pay varied according to their performance against those greening commitments?
I do not have absolutely at my fingertips how well each department across the government estate is doing in terms of the Greening Government Commitments, but I can assure the noble Lord that this has been going on through Governments for many years; I remember it happening as long ago as in the 1990s. The Government are moving in that direction. Whether the pay of Secretaries of State should be involved in this is a matter beyond my pay grade.
My Lords, is it possible that the Church of England might link the stipends of vicars and bishops to making the heating systems in their churches more efficient and greener?
I am sure that the Benches represented by the right reverend Prelates, which are particularly well occupied today, will have noted what my noble friend has had to say.
My Lords, research by NASA and at Peking University in Beijing, among others, has shown conclusively that there is now roughly 14% more green vegetation on the planet than there was 33 years ago and that 70% of that is the result of extra carbon dioxide in the atmosphere. Should oil and gas executives be rewarded for increasing the growth rates of forests?
My Lords, I am going to leave the pay of oil and gas executives to their own shareholders, and what my noble friend has said is something that they can take into account. We will continue to try to meet our own carbon reduction targets and also note the comments of my noble friends. We are making enormous progress and are on track to meet our second carbon reduction target. We are the fastest decarbonating country in the G20. Moreover, as I said earlier, we will look at our energy security and other matters.
My Lords, given that the long-term gain must be to try to get to net zero emissions—by approximately 2050—there is a lot to play for in this area. I think that we should all congratulate the Church Commissioners and the Church of England on making sure, through their pressure, that at least one company recognises that it has a responsibility, even if it is a rather novel way of doing it. Indeed, if the Minister has any worries about what other schemes we might have for capping executive pay, I have many of them up my sleeve which I could share with him. However, surely the main point here is that this has to be an all-round effort. What are the Government going to do about affecting investors whose short-term decisions often ruin the plans that they might have?
My Lords, I believe that the Government have done the right thing in giving the power to the shareholders, who are the investors. They now have the power to look at their executive pay.