Wednesday, May 5

Leading UK pension funds worth nearly £ 900bn pledge to net zero | Pension industry

Major pension funds with assets worth £ 870 billion, including those of the Church of England, Lloyds Banking Group and National Grid, have committed to reducing the carbon emissions of their portfolios to net zero by 2050 or earlier , in another sign of great investors. ‘Increasing attention to the climate crisis.

Pension providers Scottish Widows, Royal London and Nest and a handful of public sector pension funds from the UK to Scandinavia and New York were also among investors who have pledged to align their portfolios with the Paris climate targets of limit increases in global temperature to 1.5 ° C.

The pledges were coordinated by the London-based Institutional Investors Group on Climate Change as it released a set of tools that sets out how investors can achieve zero net portfolios after months of work.

The United Nations and the UK government endorsed the scheme, which is also being adopted by major climate investment groups in North America, Asia and Australasia. In a written foreword, Prince Charles said he expected big investors to publish detailed plans for net zero.

The increased focus on the climate crisis by clients and governments has forced investors to confront the carbon emissions of the companies they finance. Some investment leaders have already promised to target zero net emissions, including a promise in December from some of the world’s largest asset managers, such as Legal and General Investment Management and UBS Asset Management.

The new framework sets out tools for investors to figure out how to get to net zero by 2050 or earlier, removing a roadblock to climate action for investors. The framework includes setting regular targets for direct and indirect emission reductions, disclosure recommendations, and ensuring that all assets are net zero or on that path by 2040 at the latest.

Patricia Espinosa, Executive Secretary of the UN Framework Convention on Climate Change, said: “I encourage others to join investors who already show leadership in using the zero net investment framework. The race to a zero net future is on and the benefits it offers are vitally important. “

The UK government has identified the climate crisis as a key focus of diplomatic efforts after the UK’s departure from the EU. Glasgow will host the United Nations COP26 climate conference in November.

Guy Opperman, the UK pension minister, said national carbon reduction ambitions create “huge opportunities, but also risks, for institutional investors, such as pension schemes.”

Some investors have been wary of taking climate action, believing it will hurt their financial returns. However, Craig Mackenzie, head of strategic asset allocation at Aberdeen Standard Investments, an investment manager, said that a detailed assessment of pension fund portfolios and strategies to reduce emissions had shown that there was a marginally positive financial effect. .

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“The key question many large investors ask themselves about net zero is ‘can it be done safely?'” Said Mackenzie.

“The conclusion of this work is very positive. We can achieve very significant carbon reductions without significantly altering the financial characteristics of the portfolios. “

About 60% of carbon emissions from global stocks come from just 10% of companies by market value, Mackenzie said. If adopted by more large investors, the framework could also increase pressure on large polluters such as oil companies, heavy industry and utilities to cut emissions. The framework formalizes the steps, including voting against companies or divesting the worst laggards, that investors will need to take.

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