As part of the journey to net-zero by 2050, Scottish Widows has become the first global pension and insurance company to plan to halve the carbon emissions of all its £170bn assets by 2030.
By 2025, the firm, which has over six million customers in the United Kingdom, will also spend billions of pounds on climate solutions, such as green energies, low-carbon buildings and energy-efficient technology.
This step nearly doubles the significant promises pledged by the pension sector to meet net-zero goals, in accordance with the Paris Agreement's objectives.
The Edinburgh-based business claimed that transitioning to net zero could shield long-term consumer investments from climate change-related threats while getting the benefit of related investment opportunities.
A 'green gap' of £ 2.17trn persists, however, as the vast majority of pension funds and providers in the country are yet to formulate concrete proposals to shift their investments to net zero.
Scottish Widows, members of the Lloyds Banking Group, admitted that the path to net-zero would be difficult, but noted that for consumers, for the country and the environment, it was the best thing to do.
The pension company is pushing the remainder of the sector to close the 'green gap' immediately and pledge to net-zero with a clear plan to get there later this year ahead of the COP26 global climate change conference in Glasgow.
Maria Nazarova‐Doyle, head of pension investments at Scottish Widows, said: “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," she continued, adding: “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.”
Energy and Clean Growth Minister Anne‐Marie Trevelyan said: ”Scottish Widows’ approach follows the Institutional Investors Group on Climate Change (IIGCC)’s NetZero Investment Framework, which it helped develop - it helps provide a clear, transparent roadmap for net-zero”.
Scottish Widows will publish a target later this year for its cumulative climate solutions investment by 2025 and the carbon footprint of current investments.
The vast majority of UK pension companies currently do not have effective net zero commitments in place, despite some strides being made, with just £ 177bn in meaningful, precise net-zero commitments by 2050, with a critical intermediate goal of a 50 percent carbon dioxide equivalents reduction by 2030, in accordance with the IPCC findings.
The managed £ 170bn assets of Scottish Widows almost double this amount to £ 347bn, but there is still a £ 2.17trn gap. That indicates that 85% of the pension assets are not held in funds dedicated to net zero.
The recently revealed goals are the latest step in the Responsible Investment and Stewardship Framework for Scottish Widows.
They follow the company's announcement in November 2020 of intentions to withdraw an initial £ 440 million from firms that have not met with its environmental, social, and governance (ESG) criteria.
Nazarova‐Doyle said: “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.”
Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, added: "Through setting a net-zero target with a strong short‐term target and identifying and implementing a practical approach to realising these goals, investors play a key role in securing a sustainable and resilient future.
“We need to see investors across the entire sector align their portfolios with a net-zero future.”