The policy, published this morning (July 29), sets out the master trust’s goal of having a net zero carbon footprint across its investments by 2050 with the ambition to cut carbon emissions in its portfolio by half by 2030.
The policy aims to align Nest with the Paris Agreement goals to keep global temperature rises within 1.5C above pre-industrial levels by 2050.
To do this, Nest plans to move £5.5bn of shares into climate aware strategies, representing 45 per cent of Nest’s entire portfolio.
According to the scheme, this will immediately reduce Nest’s carbon footprint by the equivalent of taking 200,000 cars off the road.
It will also begin to disinvest from companies involved in coal, oil and arctic drilling, with the goal of becoming completely disinvested by 2025.
A greater proportion of its funds will be in green infrastructure and Nest will “actively pressure” companies to align with the Paris goals and disinvest from any that show little progress.
In addition it will commit its fund managers to make progress against set benchmarks.
Mark Fawcett, Nest’s chief investment officer, said today’s announcement sent a “strong and clear” message of the seriousness it places on tackling climate change, particularly following the economic impact of coronavirus.
Mr Fawcett said: “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. No-one wants to save throughout their life to retire into a world devastated by climate change.
“As the world’s economy slowly recovers from coronavirus, we want to ensure this recovery is a green one. We have a unique opportunity to support sustainable growth and transition towards a low-carbon economy.”
He added: “We believe our new policy sets out a clear vision of where we’re heading. We’ll now work on taking the necessary steps to become net-zero, using our close partnerships with fund managers to amplify our impact and coordinate activities towards meeting the Paris Agreement goals.
“Not only is this the right thing to do, it’s also what our savers want and expect from us. How can we offer them the prospect of a better retirement if we ignore the world they’ll be retiring into?”
Sheldon Martin, IFA at Medical & Professional Investment, said, if done correctly, this step by Nest will be seen as a positive move and highlights the scheme's social responsibility.
He added: “ESG investing is extremely topical at the moment, I recall researching only a handful of ethical models only three years ago but it has exploded in popularity since then. There seems to be a new launch in various forms almost every month.
"Nest, over time will naturally have an ever growing influence due to its increasing market share and it is important that its individual investors are always at the forefront of these decisions, I have no doubt they were.
“From a client’s perspective, choice is also important for individual investors and whilst I appreciate most remain within the default fund, it is worth noting that there are self-select ethical options already available.”
amy.austin@ft.com
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