The government should make net zero targets mandatory for pension schemes if it is serious about tackling the climate emergency.
This was the stark warning from Tony Burdon, chief executive of the campaign group Make My Money Matter, at the Corporate Adviser Summit. He pointed out that there had been “considerable success” with a voluntary approach, with a number of schemes setting ambitious targets to reduce the carbon emissions in their portfolio.
He said to date pension funds managing £800bn of assets had committed to a net zero target by 2050, and had also pledged to halve their carbon emissions by 2030. This equated to 40m pension pots.
While he had praise for those firms involved – which include Nest, Cushon, Phoenix Group and Scottish Widows – he pointed out that there was still some £2 trillion sitting in pension funds that had not made this pledge. “These pension funds are driving 2.7 degrees warming which could have catastrophic effects for the planet.”
Burdon said that the DB sector had been particularly slow to act on this issue and there were unlikely to be improvements without tough government action.
Pressure he said was building from both consumer and corporate sponsors for pensions that were addressed the climate emergency, rather than contributing to it.
He added that there was a real reputational risk for companies that did not address this issue. He have the example of Mars which recently announced “ambitious” net zero targets for the business but has so far “said nothing about its £6bn pension fund”.
As he pointed out the forthcoming COP26 climate event in Glasgow is looking at a number of key areas: these are coals, cars, cash and trees. “Pension funds have the ability to end investments in coals and boost investments into green business and electric cars.”
Burdon also said there was far more for investment consultants and advisers to do to help drive this change. He praised Redington for being one of the first firms to commit to net zero advice but said too many consultants were still “stuck on business as usual mode”.
“It is important for trustees to get the right kind of advice on how they can transition towards a 1.5 degree pathway.”