The large UK asset owner releases its first net zero transition plan, warning longer-term goals will be difficult without robust policy support.
UK-based long-term savings and retirement business Phoenix Group has admitted it will be a “challenge” to meet its long-term climate goals, as it launched its net-zero transition plan this week.
The asset owner’s carbon footprint is around 24 million tonnes of CO2, according to Dr James Wilde, Chief Sustainability Officer at Phoenix Group – equivalent to 5% of the UK’s emissions or the heating of over eight million homes.
It has pledged to decarbonise its £0.3 trillion investment portfolio through tilting its portfolio toward climate-positive investments and increasing its stewardship efforts with carbon-intensive investee companies. Specific actions include moving workplace pension customers to default sustainable plans and introducing customised decarbonising benchmarks for its credit and equity portfolios.
Phoenix has already transferred 1.5 million of its 12 million customers to sustainable multi-asset strategies and a spokesman said over the next 12-18 months, it is planning to apply a customised decarbonising benchmark to £40 billion invested across its UK and US equity portfolios.
Over the last two years it has invested £2.3 billion in sustainable assets including a £100 million venture capital fund that directly invests in climate solutions and a £330 million fund directly investing in winners in the transition.
“Much more challenging”
Speaking yesterday at the Net Zero Delivery Summit in London, Wilde said while Phoenix was confident it would meet its 2025 targets, its scenario analyses have shown hitting its 2030 target will be “much more challenging”.
Phoenix Group has a first interim target of a 25% reduction in the carbon intensity of around £160 billion of listed equities and credit by 2025.
The firm belongs to the UN-convened Net Zero Asset Owner Alliance, members of which are expected to target a 22-32% reduction in sub-portfolio emissions by 2025 and a 40-60% reduction by 2030.
Wilde said its 2030 target of at least a 50% reduction in the carbon intensity of the around £250 billion in assets it controls would be challenging for a universal owner invested in the whole economy. “We’re talking about large amounts of investment that needs to be financially attractive,” he said. “So, there we become much more dependent on government policy.”
He said a big component of its transition plan was engaging customers “to take them on the journey” and with government and regulators, noting that its £40 billion in sovereign investments had a very large carbon footprint of 10 million tonnes of CO2.
Phoenix Group also has a targeted engagement programme with 25 companies that make up 40% of the financed emissions in its portfolio. The companies include EasyJet, Equinor, National Grid and Total.
The firm regards divestment as an engagement tool of last resort, saying there is “limited evidence of a clear connection” between divestment, corporate strategy and emissions reduction.
Phoenix Group’s Net Zero Transition Plan is built on science-based targets and is aligned with the UK government’s Transition Plan Taskforce (TPT) disclosure framework and guidance from the Glasgow Financial Alliance for Net Zero (GFANZ).
The firm is expecting to update its plan every three years, in line with guidance from the TPT, subject to further decisions by the government on incorporating transition plans into mandatory reporting requirements.