Several major pension funds, including those of Lloyds Banking Group PLC (LON:LLOY), National Grid PLC (LON:NG. and the Church of England, have committed to reducing the carbon emissions of their portfolios to net zero by 2050 or sooner.
The pledges, which include pension funds with assets worth over £870bn, have been coordinated by the organisation Institutional Investors Group on Climate Change (IIGCC), which has laid out a framework to help investors align their portfolios in a manner to achieve net zero emissions in line with the goals of the Paris Climate Agreement to limit global warming to a 1.5 degree Celsius rise in global temperatures.
Some 35 investors managing around US$8.5 trillion (£6.1 trillion) in assets are already putting the framework to use, including funds such as Scottish Widows, Legal & General and an organisation covering local government pension scheme funds for Greater Manchester, Merseyside and West Yorkshire, the IIGCC said as it announced the framework on Wednesday.
“The global investment community has been called on to play its part in the transition to net zero – and it is answering that call. This new swathe of net zero commitments from asset owners demonstrates the growing determination from investors to make important decisions to support a net zero and resilient future”, said IIGCC chief executive Stephanie Pfeifer.
“Commitments are vital, but only meaningful for the long-term when realised. The net zero transition itself requires an ongoing transition from making commitments to delivering impact. The Net Zero Investment Framework, developed with and for investors, is a blueprint for action that will enable and support investors in reaching these goals”, the CEO added.
The scheme has also been backed by the UK government, with pensions minister Guy Opperman welcoming the framework’s “ambition and hugely practical guidance”.
“In the run-up to [the United Nations Climate Change Conference on November 1], more countries than ever are signing up for net zero. This creates huge opportunities, but also risks, for institutional investors such as pension schemes. That is why we’re the first major economy to legislate to require pension schemes to set targets to manage their own climate risks”, Opperman said.
Shares in Lloyds rose 0.3% to 41.2p in mid-morning trading on Wednesday, while National Grid was down 0.4% at 831.2p.