THE LARGEST pension scheme in the UK with 9 million members, has announced a new Climate Change policy to decarbonise its investment portfolio.
The policy aims to align Nest with the Paris Agreement goals to keep global temperature rises within 1.5C above pre-industrial levels by 2050.
It sets out a goal of being net-zero across its investments by 2050 or earlier, with the expectation that carbon emissions in its portfolio will halve by 2030.
Mark Fawcett, Nest’s Chief Investment Officer, commented on the announcement: “Just like coronavirus, climate change poses serious risks to both our savers and their investments.
“It has the potential to cause catastrophic damage and completely disrupt our way of life.
“No-one wants to save throughout their life to retire into a world devastated by climate change.
“As the world’s economy slowly recovers from coronavirus, we want to ensure this recovery is a green one.
“We have a unique opportunity to support sustainable growth and transition towards a low-carbon economy.
“We believe our new policy sets out a clear vision of where we’re heading.
“We’ll now work on taking the necessary steps to become net-zero, using our close partnerships with fund managers to amplify our impact and coordinate activities towards meeting the Paris Agreement goals.
“Not only is this the right thing to do, it’s also what our savers want and expect from us.
“How can we offer them the prospect of a better retirement if we ignore the world they’ll be retiring into?”
To help achieve this Nest is making a series of immediate commitments:
- move £5.5 billion of shares (equity) into climate aware strategies, representing 45 per cent of Nest’s entire portfolio. This will immediately reduce Nest’s carbon footprint by the equivalent of taking 200,000 cars off the road
- begin divesting from companies involved in thermal coal, oil sands and arctic drilling and be completely divested by 2025 at the latest, unless they have a clear plan to phase out all related activity by 2030
- invest a greater proportion of its funds directly in green infrastructure, building on the £100 million Nest has already invested in renewable projects across Europe
- actively pressure companies to align with the Paris goals and divest from companies that show little progress following sustained engagement
- commit its fund managers to making progress against set benchmarks, including analysing how Nest can halve its emissions by 2030
New survey data conducted by YouGov (16-17 July 2020) among 2,010 UK adults, of which 1,183 are saving into at least one pension, shows that UK consumers want the recovery from coronavirus to be a green one and expect their pension schemes to be playing a part.
- 4 out of 5 adults (79%) believe it’s important the economic recovery from coronavirus should take climate change into account.
- 65% of pension savers believe their pension should be invested in a way that reduces the impact of climate change. Just 4% strongly disagree.
- Over half of all adults (57%) are worried about the impact of climate change on their lives, more than the proportion who are worried about the personal financial impact of coronavirus (51%).
- While most pension savers (65%) agree that their pension should be used to tackle climate change when asked, only 1% have made a change in the last year in the way their pension was invested.
- Many are put off checking if their pension is invested responsibly, for a variety of reasons; 15% of savers said it was too complicated or difficult to know how to do, while some (17%) didn’t know they could change funds. A quarter (25%) assumed their money was already being invested responsibly, with almost two in five (38%) having simply never thought about it.
- There may also be a big mismatch in pension savers’ understanding of the role their pension could play in tackling climate change, with nearly two fifths (38%) not knowing their pensions are invested, at least partially, in stocks and shares.
- This suggests pension schemes have a responsibility to put tackling climate change at the heart of their default strategies, rather than expecting consumers to make ‘green’ fund choices. Investing in a greener world is a financial and social imperative, as well as being what savers want and expect.
Responding to Nest’s new climate change policy, Lauren Peacock, Campaign Manager at ShareAction, the responsible investment charity, added: “We warmly welcome Nest’s new policy on climate change and hope it will encourage other pension schemes to up their ambition.
“Nest’s policy acknowledges the impact of its investments on the planet and takes responsibility for them.
“By committing to engage with companies head on, all the while moving assets out of high carbon sectors, Nest is setting clear expectations for those most responsible for the climate emergency and demonstrating the power of pensions to move them along a more sustainable path.
“It is vital that engagement moves past disclosure and leads to meaningful change by companies if we are to curtail the climate crisis.”
The £5.5 billion that Nest is investing today via its climate aware equities fund represents more than £1.2 billion removed from the biggest carbon emitters and moved into companies pioneering green solutions and implementing strong transition plans, hence reducing the carbon footprint of Nest’s portfolio by the equivalent of taking 200,000 cars off the road or heating nearly 50,000 households for a year via renewables.
This follows £100 million already invested via Nest’s private credit mandate in renewables projects across Europe, such as 38 million euros into solar energy plants in Italy and Spain.