The UK's largest company pension scheme promises to decarbonise its savers' investments within 15 years as it joins global Net Zero Asset Owner Alliance
BT's £55bn company pension scheme - the largest of its kind in the UK - has pledged to decarbonise its portfolio within 15 years, as it today became the latest pension fund to commit to a net zero investment strategy in order to mitigate the financial risks from climate change.
The BT Pension Scheme (BTPS) said it was targeting net zero across its portfolio by 2035, in a move it said would involve both reducing emissions from its pensioner savings portfolio as well as investing in assets that support the transition to net zero economy.
The commitment is aligned with the Paris Agreement's target to limit global warming to 1.5C by the end of the century, and covers BTPS's direct emissions as well as from purchased energy and its value chain - or Scope 1, 2 and 3 emissions - it said.
Moreover, as part of the commitment, BTPS said it had joined the UN-convened Net Zero Asset Owner Alliance, making it the 30th member of the global initiative that counts a growing number of major banks and investors which have made net zero pledges. With BTPS having joined, the Alliance now comprises asset managers looking after $5tr of investments worldwide.
The BTPS said it had set the goal in order to "limit the risk" posed by climate change on meeting its long-term commitments, while 74 per cent of members had said they expected the scheme to continue taking into consideration the environmental and social impact of its investments. Two-thirds said they expected the scheme's investments to be used to make a positive impact on the environment and society.
"Climate change poses a clear and present threat to the scheme's ability to meet its long-term commitments," said BTPS chairman Otto Thoresen. "Continued increases in global warming will amplify existing risks and create new risks with potentially irreversible and catastrophic impacts on markets, society and the environment. Setting a net-zero goal of 2035 is ambitious but we believe the time to act is now and we hope that others will join us in setting their own net-zero goals."
In order to achieve the goal, BTPS said it would use the opportunity arising over the next 15 years from its maturing membership to reallocate assets to companies with lower emissions and focused on transition solutions. It also plans to align new and existing mandates objectives with the net zero goals, selecting and retaining managers that will deliver required investment performance while reporting against climate change targets with a net zero climate scorecard.
A revised voting policy will also be introduced and the BTPS will team up with other schemes and stakeholders to advocate for action to achieve net-zero from policymakers, regulators, governments, and other relevant organisations, it said.
It is just the latest in a line of pension schemes announcing efforts to combat climate change-related risks this year as the sector faces growing government, regulatory, and member demand to manage the financial risks associated with the anthropogenic consequences of the environmental crisis.
Yesterday the South Yorkshire Pensions Authority said it was aiming to be carbon neutral by 2030, and Aviva last week set a 2050 net-zero target for its auto-enrolment default funds and urged others to follow. Over the summer Nest said it would transition its default pension strategy to a net-zero portfolio by 2050, while Scottish Widows invested £2bn in a climate transition fund and announced disinvestments in some fossil fuel activities.
BTPS management chief executive Morten Nilsson said the pandemic also presented an opportunity to "do things differently" as the economy and society rebuilds.
"Over the next 15 years, the scheme will be reinvesting the majority of its assets and, as we look to deliver the best returns, we must not waste this opportunity to support a cleaner and greener future," he said. "Asset owners are uniquely placed to use their influence to drive decarbonisation and influence who has access to capital by setting targets to tackle climate change. But we cannot achieve this goal alone."
"Data on emissions needs to improve and companies, governments, and consumers must act," he added. "Standing by and doing nothing is no longer an option."
Since 1 October this year, schemes have faced additional ESG reporting requirements within their statements of investment principles, while also publishing annual implementation statements on how they have followed through on their ESG and stewardship policies.
A government consultation on requiring the largest pension schemes and all master trusts to report in line with recommendations from the Taskforce on Climate-related Financial Disclosures also closed yesterday.
Pensions and financial inclusion minister Guy Opperman also welcomed BTPS's commitment. "The UK was the first G7 country to legislate for net zero and I warmly welcome the BTPS' commitment to achieving their own net-zero target by 2035," he said. "This is an encouraging sign of how government, industry and investors can work collaboratively to build an appropriate regulatory framework and promote sustainable investment opportunities as we build back better, and greener."
A version of this article originally appeared at Professional Pensions