UK's biggest pension fund commits to net-zero carbon investments

The UK’s biggest pension fund, National Employment Savings Trust (Nest) has announced that it is decarbonising its investment portfolio. The government-backed pension scheme has more than 9 million members and announced on July 29 that its investment portfolio will mirror the UK’s pledge to be net-zero carbon emissions by 2050.

In a more immediate commitment, carbon emissions from firms in Nest’s portfolio will halve by 2030. To do this, Nest will:

• Move £5.5bn (45% of their portfolio) of shares into climate-aware strategies.

• Divest from companies involved in thermal coal, oil sands and arctic drilling by 2025.

• Invest a greater portion of its funds in the renewable energy generation infrastructure.

• Apply pressure on companies to comply with the 2050 target and commit their own fund managers to Nest’s 2030 target.

The move has been lauded by ShareAction, the charity which promotes responsible investment. Lauren Peacock from ShareAction hoped it would “encourage other pension schemes to up their ambition”.

Mark Fawcett, Nest’s chief investment manager, alluding to current events 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”.

Demonstrating their immediate commitment to divestment from companies involved in thermal oil, oil sands and arctic drilling, Nest announced that it will sell its final holdings in the mining giant, BHP, by August 3rd.

This throws up a potentially interesting flashpoint in putting Nest, a public corporation of the Department for Work & Pensions, on the opposing side to pensions minister, Guy Opperman. Opperman recently wrote that he favours cajoling firms towards lower-carbon emissions and “strongly believes” that to “automatically divest from certain high-carbon stocks is…the wrong approach”.

Nest’s statement also refers to a YouGov survey from mid-July where 65% of pension savers wanted pension to be invested in a way that reduces climate change. The poll shows that only 1% of those savers have taken action themselves and Nest sees this as a summons to act on behalf of their members and the planet.