Government rejects proposal to ban auto-enrolment pensions from investing in fossil fuel and arms industries 

Department of Social Protection said it was 'important' to not impose more restrictions on auto-enrolment participants’ investments than those that apply to workers paying into occupational or private schemes.

The Department of Social Protection rejected a recommendation that funds in Ireland’s new system of auto-enrolment pensions be banned from investing in the fossil fuels or arms industries.

The department said the scheme “will have a duty to, first and foremost, get a good financial return for participants”.

It is “important”, it said, to not impose more restrictions on auto-enrolment participants’ investments than those that apply to workers paying into occupational or private schemes.

However, it also said the board of the central processing authority for the pensions scheme would need to ensure investments take account of environmental, social and governance principles.

“Such principles would include taking into consideration pollution caused by fossil fuels and the potential ramifications of investing in the arms industry as part of the overarching, long-term investment strategy,” it said.

The comments are contained in a publication from the Oireachtas’ Library and Research Service (LRS) on the Auto Enrolment Retirement Savings System Bill 2024. As part of the scheme, the employee, employer and Government all pay a certain amount into the employee’s pension fund.

A new public body, the National Automatic Enrolment Retirement Savings Authority (NAERSA), will administer the scheme. Under the plans, about 800,000 workers are to be enrolled into a new retirement savings scheme, which will come into effect from early next year.

As part of the LRS analysis, the report highlights the recommendations made by the Oireachtas Social Protection Committee on the bill and the response from the department.

One of the recommendations was that the investment funds “be prohibited from investing in fossil fuels or the arms industry”.

In its response, the department said the board of NAERSA would have an investment committee which would design “high-level investment strategies” and ensure investments take account of environmental principles.

“It would also ensure that the investment managers that are contracted to invest participant’s contributions show due regard to the Paris Agreement, the UN Global Compact and the EU’s Sustainable Financial Disclosure Regulation,” it said.

“However, it is important to note that the NAERSA will not be administering a new State fund, but rather will be administering hundreds of thousands of individual savings accounts that will be the personal property of the AE participants. The AE scheme is, in that sense, a State-incentivised personal retirement savings scheme for individuals rather than a new national fund.” 

It was in that context it said the duty was to ensure a good financial return and it was important not to impose restrictions that do not apply to occupational or private pensions.

The department gave the same response to another suggestion from the Oireachtas committee, that a minimum percentage of the funds be invested in Irish renewable energy developments in order to ensure our climate action obligations.

Oisín Coghlan, chief executive of Friends of the Earth, said in the successful campaign to petition the Government to divest the Ireland Strategic Investment Fund from fossil fuels, a precedent had been set on putting conditions on how money is invested.

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