One of the largest shifts in the workplace over the past five years has been the focus on ESG issues in the context of pension investments.
Both employees and employers have been citing climate change as among the most important factors providers should be prioritising when deciding on investment strategies for pension contributions.
Maria Nazarova-Doyle, head of pension investments and responsible investments at Scottish Widows, says that of all the ESG issues, “climate change is arguably the biggest” and that “it can be argued that it’s the largest existential threat ever faced by humanity”.
She says: “The need to transition to a low-carbon world to slow down the effects of climate change and grow the green economy is now broadly accepted.
“This will require not only new ways of thinking, living and working – but new ways of investing too, both for the prosperity of the UK and to help safeguard pension savers’ investments and financial futures.”
Nazarova-Doyle sees this as an opportunity presented to fund managers and providers to “participate in and influence this transition” specifically for “the long-term benefits of customers”.
With such an opportunity at play, it seems most providers will be competing to make sure their ESG targets and actions are working for employer and consequently, employee retention.
Nazarova-Doyle explains that Scottish Widows is halving the carbon footprint of all its investments by 2030 on the path to net zero by 2050.
Alongside this the provider is using shareholder voting power to drive companies to make the necessary changes within the timescale, backing climate solutions.
She says: “We’re doing this by investing in companies adapting their businesses to become carbon neutral and those developing climate solutions, while reducing our investment in high carbon-emitting companies.
Nazarova-Doyle adds that Scottish Widows is also increasing investment in climate solutions such as renewable energy, low carbon buildings and energy-efficient technologies.
“By taking this action, we’ll be assisting and incentivising companies we invest in to embark on decarbonisation pathways of a scale and pace needed to meet the 1.5°C global warming objective of the Paris Agreement.”
Transitioning to a net zero world
She says that another part of the debate which is of equal importance is the reduction in the carbon footprint.
Scottish Widows “firmly believes reducing the carbon footprint of its investments has the potential to deliver long-term positive investment outcomes, given the stance of regulators, governments and investors alike”.
Scottish Widows is not alone as a provider taking this issue very seriously and looking to make a significant impact through ESG strategies. For Dan Smith, head of workplace investing distribution at Fidelity International, climate change is “a very real issue”.
He says: “Companies that have a strategy to reduce their carbon footprint and move to a net zero world can ultimately be the most successful businesses over the long term, within their respective sectors.
