Mercer has committed to a 2050 net zero target for all of its discretionary investment portfolios across UK, Europe and Asia, as well as the majority of its multi-client, multi-asset fund domiciled in Ireland.
This represents around £31.5bn of assets under management. To achieve this target Mercer says it will reduce portfolio relative carbon emissions by at least 45 per cent by 2030, from 2019 baseline levels.
This commitment aligns with targeting a 1.5 degree Celsius limit on global temperature increases and the Paris Agreement’s ambitions.
Niall O’Sullivan, chief investment officer of Mercer Europe & Asia, the Middle East and Africa says: “We are committing to investing for a 1.5 degree scenario because robust analysis tells us it is in the best financial interests of our members and clients. Another contributing factor is the increasing demand for a rigorous and measureable approach to climate change investment that we see from pension scheme members as well as clients.
“The target is underpinned by our well-established climate change beliefs and scenario analysis over multiple years and is supported by a climate transition plan. We are confident that through preparations completed across asset classes emissions in our funds can be reduced while delivering on our investment objectives.”
Following a climate transition plan, Mercer will be working closely with its appointed investment managers to identify and manage a staged emissions reduction plan, oversee portfolio allocations to climate solutions, and steward an increase in transition capacity across the funds. The firm recently made a similar commitment for its Australian funds and the Mercer-managed investment options within Mercer Super.
Progress on absolute emissions and carbon intensity reductions will be monitored annually – together with analysis on transition capacity and allocation to ‘green’ solutions – using the Analytics for Climate Transition (ACT) tool, launched by Mercer in November 2020.
MercerUK head of responsible investment Kate Brett says: “This proprietrary ACT tool helps set a transition pathway and position portfolios for change. The analysis identifies portfolio companies that are high carbon and low transition through to low or zero carbon and high transition.
“This assessment allows us to manage high carbon risk and to engage with companies on their ability to support a zero emissions target.”
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