Green pensions: Scottish Widows charts pathway to net-zero financed emissions

Scottish Widows has some six million UK customers

The firm said in a statement, released today (8 February), that the move will put the company on track to achieving net-zero financed emissions by 2050 – the UK government’s legally binding target date.

Scottish Widows’ statement claims that, by investing “billions of pounds” in sectors like renewable energy generation, technologies that improve energy efficiency and low-carbon buildings, it can deliver the necessary decarbonisation. At the same time, it will continue to divest from companies that are lagging behind on environmental, social and governance (ESG) issues. Late last year, the company introduced a new exclusions policy that will see it divest some £440m from businesses including those in the thermal coal and tar sands sectors.

Beyond divestment and investment, Scottish Widows is planning to increase engagement with financed companies to encourage them to adopt lower-carbon technologies, systems and processes. It has not yet confirmed plans for carbon insetting or offsetting but claims these will be a smaller part of the puzzle. 

“To do the job properly across all our products and investments, we’ll use our influence through stewardship activity to drive the transition to a low-carbon future in the real economy, while proactively investing in climate change solutions,” Scottish Widows’ head of pension investments Maria Nazarova-Doyle said.

“The journey to net-zero will not be easy but we are up for the challenge. A company of our scale cannot rely on mass carbon offsetting schemes to provide a false sense of security, or extensive exclusion lists to get results. Action that drives change in the real economy is the only way we can achieve the net-zero goals.”

Industry-wide approach?

Crucially, the new financed emissions targets cover all of Scottish Widows’ fund ranges – and the company has taken aim at others that choose, instead, to take a “piecemeal approach” and offer dedicated ‘sustainable’ funds while investing in high-carbon activities elsewhere.

Scottish Widows’ statement claims that some £2.17trn – or 85% of the UK’s pension savings – are not currently held in funds committed to net-zero. It attributes this figure to the 2020 Global Pension Assets Study from Willis Towers Watson.

“The pensions industry holds trillions of pounds worth of investments and can play a game-changing role in supporting the global economy’s transition to a low carbon future, while earning sustainable returns for pension savers,” Nazarova-Doyle said.

“We are making steady progress as an industry, but it’s not fast enough. The reality is we still have a very long way to go to close the green gap to net-zero.”

Last summer, Comic Relief co-founder Richard Curtis launched a campaign pressuring UK pension funds to halve the emissions of their portfolios by 2030 and bring them to net-zero by 2050.

Called ‘Make My Money Matter’, the campaign’s overarching ambition is to fundamentally shift the way in which the UK’s £3trn pension pot is invested, uniting consumers, employers and policy to do so. Several major pension schemes, including Nest and Smart Pension, have made these commitments.

But the UK Government seems to be stopping short of mandating net-zero through the Pensions Bill. All companies operating in the UK have a legal requirement to meet net-zero operational emissions by 2050, but green campaigners want more done to stop finance majors enabling emissions overseas in this timeline.

In its current form, the Pensions Bill’s main environmental requirement is mandatory climate risk disclosures for large schemes. Schemes holding £5bn or more will be required to disclose from 2022. For schemes holding £1bn or more, the deadline is 2023.

Sarah George

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie