UK’s largest pension fund starts fossil fuel divestment

Nest, the largest pension scheme in the UK by membership with 9 million savers, has announced a new Climate Change policy to decarbonise its investment portfolio.

The government-backed National Employment Savings Trust (Nest) aims to align with the Paris Agreement goals to keep global temperature rises within 1.5C above pre-industrial levels by 2050.

Nest have set 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.

As part of its commitments, Nest says it will move move £5.5 billion of shares (equity) into climate aware strategies, representing 45 per cent of Nest’s entire portfolio and that this will immediately reduce Nest’s carbon footprint.

In a big statement to the companies it works with, Nest say they will begin divesting from organisations 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.

They say they will actively pressure companies to align with the Paris goals and divest from those that show little progress following sustained engagement.

The pension fund have also outlined investing a greater proportion of its funds directly in green infrastructure, building on the £100 million Nest has already invested in renewable projects across Europe.

In a move to get everyone on board, Nest say they will commit its fund managers to making progress against set benchmarks, including analysing how Nest can halve its emissions by 2030.

Mark Fawcett, Nest’s Chief Investment Officer, said climate change poses “serious risks” to Nest’s savers and investments and that it can 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,” he said.

“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.

“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?”

Nest expect that the carbon emissions in their portfolio will halve by 2030. (Zbynek Burival, Unsplash) 

Survey data conducted by YouGov last month 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 green and expect their pension schemes to be playing a part.

The data claimed that four out of five adults (79%) believe it’s important the economic recovery from coronavirus should take climate change into account.

It also found that while 65% of pension savers believe their pension should be invested in a way that reduces the impact of climate change, only 4% strongly disagreed.

Victoria Ward, 32, who is a Nest saver and works as a Salesroom Manager at Kerry Taylor Auctions, called the move “reassuring” and said the coronavirus pandemic has highlighted how “volatile the world can be”.

“I’m interested to hear what more Nest will be doing in this area and pleased they’re enabling me to do my bit to fight climate change,” she added.

The £5.5 billion that Nest invested straight away in its climate aware equities fund represents more than £1.2 billion removed from the biggest carbon emitters and moved into companies pioneering green solutions.

Nest say that reduced the carbon footprint of its 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 into solar energy plants in Italy and Spain.

Lauren Peacock, Campaign Manager at ShareAction, said the responsible investment charity welcome the move and hope that it will encourage other pension schemes.

“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,” she said.

“It is vital that engagement moves past disclosure and leads to meaningful change by companies if we are to curtail the climate crisis.”

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