Nest, Britain’s largest pension scheme by number of members, said on Wednesday it would toughen up its climate change investing policy and aimed to fully decarbonise its portfolio by 2050.
The move by the scheme, which invests the retirement savings of 9 million workers, is one of the most ambitious to date and comes as regulatory pressure builds for the industry to better manage climate-related risk.
As well as the effects of climate change such as rising sea levels and more extreme weather, companies are at risk of costs associated with regulatory change and litigation linked to the transition to a low-carbon economy.
“Just like coronavirus, climate change poses serious risks to both our savers and their investments. It has the potential to cause catastrophic damage and completely disrupt our way of life,” said Mark Fawcett, Nest’s Chief Investment Officer.
“No-one wants to save throughout their life to retire into a world devastated by climate change,” he added.
Nest said it would immediately move 5.5 billion pounds in shares, or around 45% of its portfolio, to so-called ‘climate aware’ strategies, containing companies likely to prove winners in the energy transition.
The move would be the equivalent to taking 200,000 cars off the road or heating 50,000 households for a year through renewable energy, Nest said in a statement.
Nest also said there were some business activities it did not believe could ever be aligned with the goals of the Paris Climate Agreement, which aims to limit the rise in global temperatures.
As a result, it said it would begin divesting from companies involved in thermal coal, oil sands and Arctic drilling.
Companies with more than 20% of revenues from these activities would be sold by the end of 2020 and those with more than 10% of revenues by 2023, with the remainder by 2025 if they had not put in place a full, accountable phase-out by 2030.
Nest also said it would also invest more of its assets directly into green infrastructure projects such as renewable energy and push its external fund managers to help it halve emissions by 2030.
Nest said it would pressure all its investee companies to align with the goals of the Paris Agreement and would divest from those that did not move quickly enough.