UK scheme increases investment in climate-aware strategies to more than half of AUM.
UK government-backed workplace pension scheme provider National Employment Savings Trust (Nest) has announced the launch of its climate-aware emerging markets (EM) strategy, which will almost double its investment in EM equities.
The strategy will be managed by Northern Trust Asset Management and will introduce an “energy tilt” to the fund. Nest plans to reduce investment in companies with large oil or gas reserves and those with high carbon intensity while “increasing investment in clean technology and renewable energy opportunities”, the pension scheme provider revealed.
The news follows the launch of Nest’s Climate Change Strategy in July, which pledged to achieve net-zero by 2050 or sooner, halving total emissions by 2030.
The new strategy will track a customised index produced in collaboration with Northern Trust Asset Management, tilting investment toward companies based on a score calculated according to their performance across energy efficiency, alternative energy, and green building metrics.
Nest’s investment in emerging markets sat at £480 million as of September 2020 and is expected to hit £930 million by February 2021, rising from 3.6% to 6% of Nest’s total portfolio.
“Emerging markets are an exciting growth area, and we believe we can continue to successfully invest while working towards our net-zero goal,” said Diandra Soobiah, Nest’s Head of Responsible Investment.
“It’s crucial that investors in such a strategy are active stewards for companies in emerging markets. We’ll encourage companies to prepare for the low carbon transition to ensure they remain attractive investments for our members,” she continued.
With the new strategy, Nest’s investments in “dedicated climate-aware strategies” sit at nearly £8 billion, which will represent over half (51%) of the scheme’s overall portfolio by February 2021.
At the UK Sustainable Investment and Finance Association’s (UK SIF) London Conference in November, Katharina Lindmeier – Responsible Investment Manager at Nest – emphasised the importance investors are placing on accelerating the transition to net-zero emissions by 2050.
“We are committed to continuing our engagement in the industry and understand the importance of meeting investors wherever they reside on their ESG journey to help them build more resilient portfolios as we transition to a low carbon economy,” said Marie Dzanis, Head of Northern Trust Asset Management EMEA.