UK pension schemes play catch-up with employers on climate goals

By Carolyn Cohn and Simon Jessop

LONDON (Reuters) – The UK pension schemes of Vodafone, BMW and Santander plan to introduce net-zero strategies this year, they told Reuters, responding to pressure to catch up with their sponsoring employers in setting climate targets.

Regulators, lawmakers and policyholders are calling on pension schemes, which manage more than 2 trillion pounds ($2.46 trillion) in Britain, to take climate issues into consideration when making investment strategies.

Climate reporting requirements for pension schemes will increase from October, although the rules stop short of asking pensions to lay out plans to achieve a U.N. goal of reaching net-zero greenhouse gas emissions by mid-century.

Despite that, some leading pension schemes said they were looking to go further, in line with their sponsoring employers.

Setting a net-zero policy can involve cutting investment in companies performing poorly on environmental issues, investing in those offering solutions to climate change, setting firm targets on portfolio emissions and pushing company boards to take more ambitious steps to reduce their emissions.

Vodafone’s pension scheme expects “to set a net-zero target later this year along with an interim target along the way to a net-zero goal,” a Vodafone spokesperson said by email.

Santander’s pension scheme plans to adopt a net-zero target later this month, while BMW will set out its net-zero commitment in the third quarter, spokespeople for the companies said.

All three employers already have net-zero strategies.

British Steel Pension Scheme also said it would be publishing net-zero targets “shortly”.

The four schemes are among 20 large pension schemes collectively managing 200 billion pounds that have no strategy yet to progress towards net-zero climate targets, a study earlier this month from campaign group Make My Money Matter found.

A report from scientists in April said time was running out for the world to cap global warming at 1.5 degrees Celsius (2.7°F) above the pre-industrial average to limit the worst impacts of climate change.

MISSING AN ENORMOUS TRICK

“Leading businesses are urgently acting on sustainability, but it turns out many are missing an enormous trick – their pensions,” film-maker Richard Curtis, co-founder of Make My Money Matter, said.

“Now is the time for all businesses to integrate their pensions into their sustainability plans.”

Some pension funds around the world have taken a lead on climate change.

Toyota Motor Corp faced opposition at its annual general meeting this week from New York City and Danish pension funds over its commitment to battery vehicles and lobbying on climate policy.

Two climate-focused Dutch pension fund managers were last month named to lead climate negotiations with Shell.

Around 30% of FTSE 100 companies have set out net-zero strategies, the UK government said in March.

Three quarters of UK pension schemes have net-zero plans in place, or will have within the next two years, a Pensions and Lifetime Savings Association survey found last month.

Marks and Spencer and Royal Mail are among large pension schemes that have already made net-zero commitments.

Other UK pension schemes contacted by Reuters, including BP, RWE and Zurich, said they did not plan net-zero targets yet.

Some schemes pointed to the difficulties of measuring the carbon impact on investments, particularly for more illiquid assets, and said they needed to do more work on the subject first.

($1 = 0.8135 pounds)

(Reporting by Carolyn Cohn and Simon Jessop; editing by Barbara Lewis)