Aviva is calling on the government to amend the Pension Schemes Bill to make it mandatory for all auto-enrolment default funds to achieve net-zero carbon emissions status by 2050 to address climate change.
Aviva said while the Pension Schemes Bill, which is due to have its second reading in the House of Commons next week (October 7), states pension funds should disclose and report on their exposure to climate changes, it does not require them to reach a net-zero status.
The UK is legally bound to achieve net-zero emissions by 2050 and pension schemes can help to achieve this through the government also setting the same requirements on default funds, Aviva stated.
On the back of this, the provider has set the net-zero carbon emissions target for its own auto-enrolment default pension funds.
Although the end date to achieve this goal is currently set at 2050, Aviva is looking at options to move this forward to 2030.
To do this, the provider plans to invest more than £5bn into low carbon equities and climate transition strategies across its default funds over the next 18 months and will look to increase this level of investment going forward.
Lindsey Rix, chief executive officer of savings and retirement at Aviva, said: “The vast majority of savers are invested in a default fund – a fund which may take little account of climate change.
“The government’s requirements for schemes to report on their exposure to climate change is a positive move, but we have a responsibility to go even further for our customers and the next generation of pensioners.
“We believe now is the time to go further. Climate change poses a significant risk to people’s pension savings and our research shows that people want pension funds to help tackle climate change and want the government to act.”
Tim Morris, independent financial adviser at Russell and Co, said Aviva's efforts would only pay off if the provider carefully considered the companies it invests in.
He said: “Carbon offsetting has been happening for many years now and companies that effectively pay to reduce their footprint aren’t really participating in the spirit of this. This is one reason why we have ‘greenwashing’.
“However, if they are genuinely investing in better ways of doing business and with a real focus on sustainability and the wellbeing of people and the planet that can only be a good thing.”
Nevertheless he agreed with lobbying the government to action change in auto-enrolment pensions.
Mr Morris added: “With the flows of money that are contributed to the 10m AE schemes and around £100bn in total invested to date, this should have a defining impact and shift the balance further towards companies whose management team have a clear and definable strategy to invest sustainably and responsibly.”
ESG investing
Research from Aviva, published today (October 2), found concern about climate change was high among investors, particularly millennials.
Of those due to retire in the 2050s (25-34 year olds), 77 per cent were concerned about climate change, with a third of them (35 per cent) saying they were extremely concerned.
Despite this, only 37 per cent of all people knew that their pension can play a role in tackling climate change, Aviva found.
Of the 3,000 people surveyed, 56 per cent supported Aviva’s call for the government to require default pension funds to achieve net zero carbon emission status by 2050.
Meanwhile, the research suggested environmental, social and governance investing had become more mainstream, with almost two thirds of millennials aware of it and 13 per cent knowing exactly what it entailed.
In addition, when asked if they would invest through their workplace pension in an ESG/ethical focused fund if it was available, the majority (71 per cent) of millennials said they would – the highest proportion of all those surveyed.
amy.austin@ft.com
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