Net-zero investment portfolios promised by 14 major UK pension funds

The UK's pensions sector covers some £3trn of investment and while large schemes are required to measure and disclose climate risks

Signatories of the commitment, led by the Prince of Wales’ Accounting for Sustainability (A4S) initiative, collectively manage almost £268bn in assets, and it is hoped that dozens more names will sign on ahead of COP26 in November.

The commitment is called the ‘Net-Zero Statement of Support’. It commits supporters to announcing net-zero targets within 12 months of signing on, supported by 1.5C-aligned interim goals. The Intergovernmental Panel on Climate Change (IPCC) has recommended that global net emissions are halved by 2030, so many firms will be making commitments along this line of thought.

Also included in the Statement of Support are commitments to “be an active shareholder across all relevant asset classes”, “collaborate with peers to innovate ways to bring influence to bear in the interest of our members” and “understand climate risk in a holistic manner, managing these risk factors within our investment portfolios”.

The 14 initial supporters of the Statement of Support are the BT Pension Scheme; HSBC Bank Pension Trust UK; Barclays UK Retirement Fund; Brunel Pension Partnership; the Tesco Pension Scheme; the Health Employees Superannuation Trust Australia (HESTA); the National Employment Savings Trust (Nest); the South Yorkshire Pension Fund; the Unilever UK Pension Fund; the Environment Agency Pension Fund; the Merchant Navy Officers Pension Fund; the Atos UK 2019 Pensions Scheme; the Pennon Group Pensions Scheme and Scottish Widows Master Trust.

Several of these organisations have already announced net-zero targets.

Nest, for example, outlined a roadmap to net-zero last year, including a commitment to remove thermal coal, oil sands and Arctic drilling from its portfolios by 2025. Net-zero targets have also been announced by the likes of the Brunel Pension Partnership, the BT Pension Scheme, the Environment Agency Pension Scheme and Scottish Widows.

For these firms, key aims of participating in A4S’s commitment will be sharing experiences and practices with other members and encouraging other schemes globally to follow suit.

“Pension schemes are highly exposed to the risks of an unsustainable future, but also powerfully positioned to influence a sustainable outcome,” A4S’s executive chairman Jessica Fries said.

“The pension fund chairs who are signing our Net Zero Statement of Support are committing to address the risks of climate change and invest in a resilient, sustainable future. A4S will be supporting this commitment through our practical guidance.”

Galvanising individual action

The announcement from A4S comes in the same week that Make My Money Matter  – the organisation set up by Comic Relief co-founder Richard Curtis in a bid to press all UK pension funds to align with climate science – published new research on the contribution of pensions to an individual’s carbon footprint.

Compiled in partnership with Aviva and Route2, the research claims that the average UK adult can reduce their annual carbon footprint by 19 tonnes by shifting to a “greener” pension. This reduction is 21 times higher than the reduction that could be achieved by going vegetarian, taking no flights and switching to renewable electricity in the home.

“Make My Money Matter believes it is vital that individuals continue to take these steps to reduce their climate impact, but also make sure their money complements those efforts, rather than undermine them,” the organisation said in a statement.

Curtis added: “We need the entire UK pensions industry to go green – making their default funds more sustainable so all savers can have a pension to be proud of. As individuals, we have a critical role to play in driving this change by showing providers that we want our money invested in a way that does good, not harm, so that we can retire into a world that isn’t on fire. “

The research is forming part of the communications campaign around a new initiative, called the ‘21x Challenge’, whereby individuals are being asked to challenge their pension provider to increase their climate commitments.

Sarah George