Date Published: 18/03/2021 12:15
There's been a lot of talk about climate change and ESG investments, so it's interesting to see the latest move by some pension funds, says Jillian Thomas.
A new Net Zero Investment Framework has been launched by the Institutional Investors Group on Climate Change (IIGCC) which outlines a commitment to net zero carbon emissions by 2050. The framework aims to encourage investors to develop an investment strategy that achieves net zero, and the framework is already being put into practical use.
At the time of writing, 36 investors collectively managing assets of over £6.1trillion have adopted the framework. Among these investors are a significant number of pension schemes: Scottish Widows, the Environment Agency Pension Fund, Royal London, National Grid UK Pension Scheme, the Church of England Pensions Board, Brunel Pension Partnership, Northern Local Government Pension Scheme, Lloyds Banking Group Pensions Trustees Limited and Nest.
The investment framework is designed to deliver on the Paris Agreement goal of keeping global warming well below 2 degrees celsius, compared to pre-industrial levels, preferably below 1.5degrees. It’s built upon three specific types of target which will be used to measure success. These are portfolio level targets for decarbonisation and investment in climate solutions, timebound portfolio coverage targets for companies and assets to meet net zero or aligned criteria, and engagement coverage threshold ensuring intensive engagement to drive the transition.
UK Pensions Minister, Guy Opperman, had this to say about the framework: “Bringing climate change to the top of the agenda and ensuring that Britain’s pension investments act on managing climate change risk will not only help the UK reach net zero, but ensure a brighter future for all.”
“In the run up to COP26 (the UN Climate Change Conference) more countries than ever are signing up for net zero. This creates huge opportunities, but also risks, for institutional investors such as pension schemes. That is why we’re the first major economy to legislate to require pension schemes to set targets to manage their own climate risks.”
“I therefore welcome both the ambition and hugely practical guidance contained in this framework, which will help even more institutional investors aim for net zero.”
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