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Britain’s biggest pension fund, National Employment Savings Trust (Nest), said last year they intended halving their emissions by 2030 on the way to reaching net zero by 2050. They have now followed up by announcing a partnership with Octopus Renewables – Europe’s largest investor of utility scale solar power and a significant investor in wind and biomass in the UK – to boost investment into the clean energy infrastructure.
Nest is the government-backed pension scheme which was established in 2010 to support the introduction of automatic enrolment. It has since gained more than 9 million members representing about a quarter of the nation’s workforce and currently manages about £16bn of UK pension savings.
A corporate plan released early last year stated that Nest had increased their focus on incorporating environmental, social and governance (ESG) factors into their investment decisions. This culminated in last summer’s net zero declaration and subsequent divestment of certain fossil fuel companies from their portfolio. The plan also stressed a desire to show leadership in responsible business practices relating to employees and the organisation’s supply chain.
In August last year, Nest confirmed that its investment portfolio was completely devoid of all tobacco investments having decided that tobacco was a poor investment. Aside from the ethical factors involved, the pension fund also cited hard-nosed business reasons including stricter worldwide regulation against tobacco products and falling numbers of smokers for their decision. The offloading of £40m of tobacco-related stock was achieved a year ahead of target.
Nest announced in December that it would nearly double its investment in emerging markets by February 2021 from around £480m to £930m (or from 3.6% to 6% of Nest’s total portfolio). Anticipating emerging markets outpacing growth in developed regions, they would utilise a customised index produced in collaboration with Northern Trust Asset Management. The index rates companies based on their energy efficiency, alternative energy and green buildings and it allows Nest to tilt their investments towards those scoring high on these criteria.
The new partnership with Octopus Renewables was announced on March 13th. Octopus entered the renewables market in 2010 and currently manages a global portfolio of renewable energy assets valued at more than £3bn with a combined capacity of 2.8GW. They will now lead Nest’s plan to invest £250m in clean energy infrastructure across UK and Europe this year.
About two-thirds of the £250m will be invested in green projects which are either at the construction stage or already operational and it is envisaged that up to 25% of the funding could be allotted toward earlier-stage developments. Mark Fawcett, Nest’s chief investment officer, says they want to “invest in the energy of the future, not the past. The money we manage on behalf of our members needs to provide steady returns for the next 10, 20 30 years”.
Those investments could amount to as much as £1.4bn before the end of the current decade.
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