Fund Solutions

UK Pension Provider Commits to Net Zero

Cardano Group to measure portfolio-financed emissions per pound invested.

Pensions risk and investment management provider Cardano Group has pledged to reach net-zero greenhouse gas (GHG) emissions by 2050, halving current CO2 levels by 2030, according to its climate plan published this week. The firm has said these targets will apply to its £16 billion of fiduciary management assets and £45 billion under advice in the UK.

As a member of the Net Zero Asset Managers Initiative, Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC), Cardano’s climate plan also commits to measuring portfolio-financed emissions per pound sterling invested, and will use enterprise value including cash (EVIC) as its primary measure for setting decarbonisation targets. The firm highlighted its investments in green and sustainable bonds as a key element of its sustainable investment approach alongside low carbon equity “with a preference to engage and change behaviour, rather than divest”.

“Despite recent momentum, government action to tackle the climate crisis has so far been highly insufficient. We believe net zero is a collective action problem. First and foremost, we will align our investment portfolios with net zero. But ultimately, we need to move the market as a whole. That’s why we’ll work collaboratively to protect our beneficiaries from the environmental and financial consequences of climate change,” said Kerrin Rosenberg, CEO of Cardano UK.

Cardano noted that pension providers should be sending a clear message to both companies and regulators to ensure net zero remains “a collective action problem”.

This includes regulators working to properly price the climate crisis in markets, as “markets are financing investments that remain profitable in the short-term, but are inconsistent with long-term environmental and financial goals,” Cardano said.

Having emitted 491 tonnes of CO2 in 2020, the pension provider aims to offset emissions it cannot reduce in the short-term.

“Our chosen offset is Cookstoves for Maasai Communities, Kenya, which has links to BIX Capital, an impact investment initiative funded by Cardano Development,” the climate plan noted.

Cardano recognises that climate change is a dynamic concept and will require some adaptability from the owner-managed provider, particularly as data and methodologies continue to evolve. Its net zero commitment will be updated “periodically”.

Cardano Group’s master trust pension scheme NOW: Pensions, which Cardano acquired in 2019, has also pledged to reach net-zero by 2050 and halve portfolio emissions by 2030. The UK workplace pension provider for 1.8 million people further plans to invest at least 50% of its £2.5 billion portfolio in sustainable bonds and equities by the end of the year.

“We believe the focus on ESG supports better long-term financial outcomes for our members in later life. Our investment approach – centred around a single default fund – is focused around the needs of our members, providing returns to deliver good member outcomes, while also providing protection from market volatility as they approach retirement,” said Joanne Segars, Chair of the Trustees for NOW: Pensions.

NOW: Pensions has increased its allocation to green and social bonds and is investing in a low carbon ESG equity portfolio, after the master trust’s Trustee conducted a ‘root and branch’ review its investment strategy to achieve full ESG integration.

The Trustee will be further exploring an additional sustainability mandate, which will place a greater focus on environmental and social solutions that deliver the higher return objective.

The commitments from both pension providers follows pressure from the Make My Money Matter (MMMM) Campaign.

Earlier this month, MMMM CEO Tony Burdon wrote to the CEOs of 20 of the UK’s leading defined contribution (DC) pension providers, representing a total £175 billion in AUM, urging them to make “robust commitments to reduce their emissions” ahead of COP26.

The campaign is targeting the £2.6 trillion currently in UK pension schemes and aims to work with businesses to make sure that their pension investments align with net-zero targets while members’ views on sustainability and ESG are taken into account in investment decisions.

“With more than £2 trillion in UK schemes not committed to net zero, most peoples’ pensions are harming the planet, and risk jeopardising their returns. That’s why ahead of COP, we want all providers to commit to robust net zero targets – and halve emissions this decade – so that we all have pensions to be proud of,” said Burdon.

The campaign is also partnering with UK pension funds to aid in their transitions to net zero, such as Co-op’s Pace Defined Contribution (DC) pension scheme last month.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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