Investment consultant Redington will be aligning all default client advice with the goal to reach net zero carbon emissions by 2050 at the latest, as outlined in the Paris Agreement.
The firm, which advises on more than £500bn (€575.5bn) of assets, has estimated that as a result of this change most clients will achieve a 50% reduction in carbon emissions by 2030.
Mitesh Sheth, chief executive officer of Redington, told IPE that the consultancy “is a very purpose-driven firm with the aim of making sure that 100 million people are financially secure.” However, he asked: ”But what does that mean? We want to make sure that’s not at the expense of people or planet. If we want to have a real impact on a sustainable future we need to imbed this into our core advice.”
“There is an ever-increasing focus on what we, as an industry, can do to create a sustainable future for all. As an adviser to over £500bn of client assets, allocated across 150+ asset managers, we recognise that we have a responsibility to use our influence as a force for good, creating positive change within the savings and investment industry.”
This commitment represents a meaningful evolution to the way Redington will work to deliver investment advice and set strategic asset allocations for clients, and sits alongside a broader seven-point climate action plan to integrate sustainability across its entire business, including commitments to reduce and offset its own emissions.
“Addressing the threat of climate change is no mean feat – and whilst we are working to reduce and offset our own emissions, we know that having a meaningful impact will require a lot more than this,” Sheth said.
He added: ”Offering standalone sustainability services is also not enough, which is why we have taken this next step and committed to integrating sustainability across our entire business.”
Sheth said the move represented “the biggest transition that we as a business have gone through since our founding”, but something he believes is vital in order to “truly make an impact through our influential role in the broader value chain”.
“That said, the global transition to net zero is a monumental task. It will require our continual innovation, experimentation, and the sharing of different perspectives. We can only achieve this through collaboration with our clients, asset managers, industry peers, and policy makers. Together, we can make a meaningful difference.”
Edwin Whitehead, senior vice president of responsible investment at Redington, told IPE that ”climate has changed, there is nothing we can do about that. It is in the past tense: climate changed”.
He said: “There is no space to not act. To meet the goals of the Paris Agreement […] greenhouse gas emissions do need to come down. That is non negotiable.”
“As a pension scheme there is no need to stand on the sidelines and watch it happen around you. We’re saying to our clients that [their] portfolio emissions need to start coming down and to be aligned with their other investment objectives,” Whitehead explained.
Redington’s seven-point climate action plan:
1. Objective Setting: helping clients articulate their own climate-related objectives and integrating three key metrics – carbon emissions, climate risk management, and impact – into Redington’s investment framework to help clients achieve their goals while contributing to real-world economy decarbonisation.
2. Climate Solutions: continuing to seek out attractive investment opportunities in climate solutions and helping clients achieve their impact objectives, contributing to the real-world transition to a net-zero emissions economy. Over the past two years, Redington has helped clients commit £1.8bn to the development and construction of renewable energy infrastructure. The consulancy estimates this will result in an approximate reduction of 940k tonne in carbon emissions per annum, which equates to removing around 186k cars off the roads each year.
3. Industry Frameworks: helping clients adopt, and actively engage with, appropriate industry-recognised frameworks – such as those developed by the Paris Aligned Investor Initiative, of which Redington is a member – in order to facilitate the transition to net zero.
4. Stewardship: developing a framework to assess the effectiveness of the climate-related stewardship carried out by asset managers, including voting on climate transition plans, and undertaking purposeful engagement with managers to encourage alignment with the Paris Agreement throughout the wider investment value chain.
5. Default Client Advice: aligning its model portfolios with the goals of the Paris Agreement – to limit global warming to 1.5°C and achieve net zero by 2050 – thus changing the way Redington advises its clients to set strategic asset allocations. As a result, the firm envisages most clients will achieve a 50% reduction in carbon emissions by 2030.
6. Carbon Offsetting: using high quality nature-based offsets to become a net-zero business by the end of 2021.
7. Industry Collaboration: sharing lessons learned and working with peers to create a Paris-aligned industry, maintaining its culture of being open and transparent.