A Government-led climate change report, urging the UK to target ‘net zero’ carbon emissions by 2050, is asking investors to challenge their pension fund providers to ensure they support low carbon industries.
This report was published by the Committee on Climate Change, an independent advisor to the government.
This CCC report says it would be difficult to hit net zero commissions prior to this date – but said a 2050 target would be a “significant goal”. This could only be achieved by concerted government action, backed by both policy and money.
It adds that if other countries follow this lead there’s a 50-50 chance of staying below the recommended 1.5C temperature rise by 2100.
Over the past year there has been increased pressure, backed by forthcoming legislation, to get pension funds to formulate and publicise an ESG (environmental, social and governance) strategy, and to consider these risks as material to long-term investments returns.
Trust based workplace pensions will be required to stated an ESG policy by October, and consultation is underway for IGC to adopt a similar approach.
Increased demand from investors is likely to hasten this process, and could be pressure on providers and trustees to take a stricter line on such issues, particularly those surrounding the environment and climate change.
The government is studying the report, which has substantial implications for public finances, and says it “sets us on a path to become the first major economy to legislate to end our contribution to global warming entirely”.
To reach these targets the report suggests a big push to reduce carbon emission in a number of industries: including heat generation, and the steel, paper, aluminium and paper industries. It is also look at changes to transportation and farming.
These could have an impact on many of the major companies that pension funds invest in.
Share Action in conjunction with a number of large asset managers, has been putting pressure on many corporations to improve their environmental track record, via shareholder votes.
In April, the group co-ordinated action against the Italian bank, UniCredit. With shareholders – Schroders, Candriam and Storebrand – it sent a letter to the bank’s CEO, demanded it publicly discloses how it is going to deal with the risks posed by a worsening climate crisis, as well as restricting current coal financing.
It is expected that similar action may follow with other large companies who are slow to devise a climate change policy or set out a plan to reduce carbon emissions.