Manager Engagement Key to Co-op Net-Zero 2040 Target

UK retail group’s partnership with Make My Money Matter solidifies commitment to sustainable options for members.

The Co-op Group’s pension scheme trustees have committed to increasing their level of engagement with fund managers on decarbonisation strategies, as part of an organisation-wide commitment to achieving net-zero greenhouse gas (GHG) emissions by 2040.

“We already meet with all our fund managers on a rolling basis, and ESG and stewardship are a standing item. As a starting point, aligned with our adoption of Task Force on Climate-related Financial Disclosures (TCFD), we’re discussing how asset managers can support us by providing consistent data on carbon metrics, building this into the ‘business as usual’ reporting we receive,” a Co-op spokesperson said.

The Co-op is on track to meet the UK’s mandated TCFD requirements, in which occupational schemes with more than £5 billion in assets under ownership are expected to provide climate-related financial disclosures from seven months after their 2021 year-end date. Following a consultation, the UK government is due to provide final guidance on its TCFD-aligned climate reporting rules in Q4 2021.

“Once we’ve established our TCFD objectives and timescales, we’ll be working with our managers on how this aligns with their mandates (which is likely to be an iterative process), factoring in the asset classes they manage, likely holding periods and any future de-risking for the defined benefit (DB) pension scheme.”

In line with regulatory requirements, from 2022 the Co-op’s Pace Defined Contribution (DC) pension scheme will annually report on its carbon footprint and management of climate risks. Trustees will oversee regular, comprehensive scenario modelling of the impact different climate outcomes will have on the scheme’s investments and funding positions.

The DC scheme is automatically available to all 62,000 Co-op employees. It follows the previous defined benefit scheme, which closed to new members in 2015 but continues to house contributions for members who joined the Co-op Group prior to this date.

Last week, the Co-op confirmed it had partnered with sustainable pensions campaign Make My Money Matter as part of its organisation-wide ten-point plan to achieve net-zero by 2040.

Targeting the £2.6 trillion currently in UK pension schemes, the Make My Money Matter Campaign aims to work with businesses to make sure that their pension investments align with net-zero targets and that members’ views on sustainability and ESG are taken into account in investment decisions.

The Principles for Responsible Investment (PRI) recently published a guide for asset owners on how to implement beneficiaries’ sustainability interests into investment strategies, following the increasing acknowledgement that investments need to reflect beneficiaries’ values.

As part of the partnership, the Co-op will engage with its employees to increase transparency on how their pension pots are invested and better understand their sustainability priorities.

With an annual turnover of £10 billion, the Co-op’s ten-point plan concerns all arms of the business, including Food, FuneralCare, Power and Insurance.

Its pension schemes’ assets are invested by the respective trustees, therefore all 10 points of the Co-op’s business and net-zero transition “won’t necessarily apply to an investment strategy diversified by sector and region”. However, the plan does include directing finances towards reducing carbon – e.g. investing in green projects – and “rapidly reducing carbon from operations and products”, the spokesperson noted.

“We are clearly facing a monumental climate change crisis and must recognise that we have a part to play. We simply have to do more and quicker. By partnering with Make My Money Matter and committing to engage with our members and our pension funds, we’re providing our members and colleagues with another way to help combat the climate change crisis through sustainable investments,” said Gary Dewin, People Director at the Co-op.

In 2019, trustees introduced a sustainable, lower carbon default option for its DC pension scheme by becoming one of the seed investors in the Legal and General Future World Multi-Asset Fund.

“We believe that green pensions should be the new normal for any organisation committed to tackling the climate crisis – and that all new employees should be given a green option when starting a new job. With COP26 on the horizon, this is a crucial year for climate across the globe. With a growing demand from across society to ‘build back better’ from this pandemic and to build a net-zero world, the time for action is now,” said Tony Burdon, CEO at Make My Money Matter.

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