Nest and UBS Asset Management have divested from five energy companies due to their lack of engagement around climate change.
The largest is Exxon Mobil, with the four other companies being Imperial Oil, Kepco, Marathon Oil and Power Assets.
Nest’s share ownership in these five companies, through its Climate Aware fund was worth £40m at the end of June 2021. Nest says these companies will not return to its main portfolio until they demonstrate clear progress in preparing for the low carbon economy.
Nest has also announced it is strengthening its net zero commitment, introducing a new carbon reduction target to reduce emissions across its listed equites and fixed income portfolios by 30 per cent by 2025. This is baselined against its 2019 portfolio.
UBS says it is excluding these five companies from its range of climate aware funds, including the one that it manages for Nest. It has also removed these companies from its actively managed equity and fixed income sustainability funds.
This decision follows a three-year engagement programme UBS led as part of its climate aware framework which sought to engage with 48 oil and gas companies identified as lagging in climate change performance.
UBS and Nest says that as a result of this programme 60 per cent of companies companies made good or excellent progress during this time in transitioning their business towards a lower carbon economy.
UBS has also announced it is extending this programme to include 46 companies working in the automobiles, chemicals, construction and materials, electricity, industrials, utilities, metals and mining industries alongside oil and gas producers.
Nest says oil and gas companies represent a significant proportion of the world’s greenhouse gas emissions and can equally provide capital and technologies to solve it. Nest, which currently represents a third of the UK workforce, has made clear it will not support companies its membership owns that don’t proactively manage their exposure to climate risk, or do not engage with shareholders over its concerns.
Nest senior responsible investment manager Katharina Lindmeier says: “COP26 showed the need for immediate action. The prospect of a 2.4C global temperature rise will cause dramatic changes to our ways of life and businesses need to be preparing now to remain profitable and successful.
“At Nest we aim to work with companies to encourage sustainable business decisions but will draw the line somewhere. The five companies being excluded have not done enough to convince us that we should remain shareholders.
“The new short-term climate target we’re announcing today should demonstrate not only our commitment on becoming net zero, but also that we’re not hanging around. We want to be on the front foot for such an important issue like climate change to achieve better risk-adjusted returns for our members.”
UBS Asset Management head of thematic engagement and collaboration Francis Condon adds: “We view engagement as fundamental to any sustainable investing approach. Through engagement, investors can be a force for good in influencing corporate behaviour and accelerating action in those sectors where it is most needed.
“Our three-year engagement programme provided companies with time to understand our concerns and act on them. We have seen positive progress from most companies in the program on their climate strategy and transition to a lower carbon economy. However, where we have not seen tangible progress, we are taking action.”
