NOW: Pensions, a UK-based workplace pensions provider, is to increase investment with explicit sustainable objectivesfrom 56% to 82%, accroding to its latest Task Force on Climate-related Financial Disclosures (TFCD) report.
The pensions provider has committed to reaching net zero greenhouse gas emissions by 2050, with an interim target of 50% reduction by 2030 based on 2019 levels, in line with the Paris Agreement goals of limiting global warming to 1.5°C versus pre-industrial levels.
NOW: Pensions said climate change is among the “core sustainability issues” which inform its investment strategy. Its three priority sustainability issues are climate action, gender equality and living wages.
According to the report, it has increased its corporate physical equity investment and decreased its derivative investment which led to minor changes in its regional allocations. In addition, NOW: Pensions has also made sectoral changes within the portfolio in response to wider economic pressures, such as higher interest rates.
The provider has also introduced a decarbonisation framework over the last year with its investment manager Cardano.
The framework monitors progress to reduce the emissions in the business’ investment portfolio and the wider economy. NOW: Pensions actively reviews this via its investment allocations to help meet its ambitious decarbonisation targets.
According to the report, a total of 23 green, social or sustainable bonds now make up over 15% of the provider’s portfolio, up from 13% last year.
Patrick Luthi, chief executive officer of NOW: Pensions, said the last 12 months have been a “test of resolve” for many on sustainability, but the provider’s conviction and commitments have “not changed”.
He said: “As well as managing short-term risks, we are continuing to invest with our members’ long-term financial position in mind to deliver a more sustainable society.”
Luthi added that NOW: Pensions remains “resolute” in the aims set out in 2017 when the provider began investing in green, social and sustainable bonds.
He said that NOW: Pensions “regularly reviews” its investment strategy to ensure it aligns with the three priorities of its sustainable strategy.
“These commitments are essential to our long-term mission to help deliver fair pensions for all,” he noted.
Joanne Segars, chair of the board of trustees, added that the progress over the last 12 months and the introduction of the decarbonisation framework has allowed the provider to increase the alignment of its investment with “clear” sustainability objectives.
She said: “This means we are on track to hit our goal of reducing the level of greenhouse gas emissions within our portfolio by 50% by 2030.”
Earlier this year NOW: Pensions carried out a series of focus groups with members and employers to better understand their views on sustainability, Segars said the results showed an increasing awareness of corporate social responsibility and ESG.
She said: “Some members felt that some investments are morally wrong, such as specific products like weapons and tobacco, but also recognised that divesting from fossil fuels is not always straightforward.”
She added: “A key learning, and next step for NOW: Pensions, is to consider improvements on how the scheme and industry more broadly can improve communicating responsible investment to members and employers.”
Read the digital edition of IPE’s latest magazine