Scottish Widows has committed to target net zero by 2050 across its entire £170bn portfolio of investments, the first life insurer provider to do so.
Scottish Widows says its pledge almost doubles the meaningful commitments the UK pension industry has made to net zero goals, in line with the goals of the Paris Agreement, but still leaves £2.17 trillion of pension assets not targeting net zero – a figure the provider is describing as a ‘green gap’.
The commitment includes clear milestones, including the aim of halving the carbon footprint of its investments by 2030.
Scottish Widows’ approach follows the Institutional Investors Group on Climate Change (IIGCC)’s Net Zero Investment Framework, which it helped develop. Later this year, Scottish Widows will publish a target for its overall investment in climate solutions by 2025 and the carbon footprint of existing investments.
The company, which has more than six million customers in the UK, says it will also invest billions of pounds in climate solutions, such as renewable energy, low carbon buildings, and energy efficient technologies, by 2025 to underline its commitment to positive change.
Scottish Widows says moving to net zero will safeguard customers’ investments in the long-term from the risks associated with climate change while taking advantage of related investment opportunities.
Scottish Widows, part of Lloyds Banking Group, said the road to net zero would be complex but it was the right thing to do for customers, for the country and the environment.
The pensions provider is calling on the rest of the industry to urgently close the ‘green gap’ and commit to net zero with a clear path to get there ahead of the COP26 global conference on climate change later this year. Pension providers need to shift from the current piecemeal approach, to a wholesale net zero investment strategy with clear shorter- and medium-term milestones that are understood by the public, customers and policymakers.
The targets announced today follow its November 2020 plans to divest an initial £440 million from companies that have failed to meet its environmental, social and governance (ESG) standards.
The provider calculates that just £177bn of pension assets in meaningful, specific commitments to net zero by 2050 with an interim target of 50 per cent CO2e reduction by 2030, in line with the IPCC findings. Scottish Widows’ £170 billion assets under management almost double this total to £347 billion.
Energy and Clean Growth minister Anne-Marie Trevelyan says: “Eliminating the UK’s contribution to carbon emissions requires urgent action across society and the whole economy.
“Scottish Widow’s fantastic commitment will help create meaningful, large-scale change across the financial sector, positioning the UK as the global centre for green finance while protecting customers and the environment from climate change.”
Richard Curtis, founder of Make My Money Matter says: “Six months ahead of COP26, the pensions industry has finally reached a tipping point in the fight against climate change. This ambitious commitment from Scottish Widows showed what we’ve long known – that our pensions can be a hidden superpower in the battle to build a better world. This commitment almost doubles the pledges made already – that’s six million people using their pensions as a decisive tool to fund the battle against climate change.
“Now we’ve reached this crucial stage, it is critical the rest of the industry follows suit.
“That’s why we echo Scottish Widow’s call for all providers to step up and close the two trillion green pension gap. With net zero commitments secured from Aviva, Nest, Scottish Widows and more – the movement for pensions to be proud of grows stronger every day. This is the tipping point we’ve been waiting for; inaction is no longer an option.”
Scottish Widows head of pension investments Maria Nazarova-Doyle says: “Our first responsibility is always to our customers and ensuring we are looking after their investments for the long-term. Moving to net zero will protect savings against climate-related risks and uncertainty and offer longer-term sustainable growth by accessing low carbon transition opportunities.
“To get there we must set shorter-term targets. Carbon emissions need to halve between now and 2030 or we won’t stand a chance of meeting the longer-term net zero goal.
“To do the job properly across all our products and investments, we’ll use our influence through stewardship activity to drive the transition to a low-carbon future in the real economy, while proactively investing in climate change solutions.
“The journey to net zero will not be easy but we are up for the challenge. A company of our scale cannot rely on mass carbon offsetting schemes to provide a false sense of security, or extensive exclusion lists to get results. Action that drives change in the real economy is the only way we can achieve the net zero goals.
“The pensions industry holds trillions of pounds worth of investments and can play a game changing role in supporting the global economy’s transition to a low carbon future, while earning sustainable returns for pension savers.
“We are making steady progress as an industry, but it’s not fast enough. The reality is we still have a very long way to go to close the green gap to net zero. To help prompt the shift to a low carbon economy, others within our sector must also make meaningful, large-scale net zero commitments that include a dramatic reduction in emissions, if we were to have a chance to get to net zero by 2050.”
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