UK pension fund commits to net zero investments by 2050
The UK’s biggest pension scheme by number of members has announced it will begin to decarbonise its portfolio to net zero by 2050, putting the spotlight on others who are not following suit.
UK government-backed National Employment Savings Trust (Nest) announced it will begin divesting from companies involved in the most aggressive forms of fossil fuel extraction, 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”.
Instead it will put £5.5bn into “climate aware” investments such as renewable energy generation infrastructure and flexible energy technologies. The announcement comes as regulatory pressure builds for the industry to better manage the risk of costs associated with regulatory change and litigation as the UK moves towards a net-zero economy.
Nest’s chief investment officer Mike Fawcett said that the Covid-19 recovery, compounded by the Government’s decision to legislate for net-zero last year, poses “a unique opportunity to support sustainable growth and the transition to a low-carbon economy”.
“Just like coronavirus, climate change poses serious risks to both our savers and their investments,” Fawcett said. “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.”
Nest isn’t the first pension fund to announce divestment plans. In 2016 Waltham Forest’s local government pension scheme was the first to commit to full divestment – selling out of coal, tar sands, oil and gas.
However, most funds have shown reluctance to divest, especially from oil and gas. In June, the £68bn Universities Superannuation Scheme said it would divest from coal investments after years of intensive lobbying but retain oil and gas investments.
Polling for Nest found that 65% of pension savers believed their pension should be invested in a way that reduced the impact of climate change, while just 4% strongly disagreed. But these values aren’t being translated into action. In fact, a recent YouGov survey of more than 4,400 UK citizens found that 72% do not know how their money is being invested.
This means that the lion’s share of the total amount paid into the UK’s pension schemes still goes to oil and gas companies. At the end of 2019, UK pensions alone were invested in assets worth approximately £3 trillion.
To put it bluntly, your pension – perhaps your greatest contribution to the financial system – could be propping up industries which fuel dangerous climate change. How your pension is invested not only has a direct impact on the health of the planet but on the security of the economy and your savings.
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