The workplace pensions provider increases investments with explicit sustainable objectives from 56% to 82%
A total of 23 green, social, or sustainable bonds now make up over 15% of the providers portfolio, up from 13% last year
Monday 23rd October 2023: NOW: Pensions has today published its second Task Force on Climate-Related Financial Disclosures (TCFD) report*, covering the period 1 April 2022 to 31 March 2023. The latest annual report shows an increase in the number of investments that explicitly include sustainable objectives, now making up 82% of the investment portfolio.
The workplace pensions provider has committed to reaching net zero greenhouse gas emissions by 2050, with an interim target of a 50% reduction by 2030 based on 2019 levels. This is consistent with the Paris climate agreement goals of limiting global warming to 1.5°C versus pre-industrial levels.
Alongside the three key metrics established last year, a further metric – focusing on alignment to the Paris climate agreement – has now been made a regulatory requirement.
NOW: Pensions measures this by the percentage of assets under management within its portfolio that have science-based targets in place, as reviewed by the Science Based Targets initiative (SBTi).
The TCFD report discloses four key metrics:
- Metric 1 is the total greenhouse gas emissions of NOW: Pensions corporate equity exposures: This is 142,900 tons of greenhouse gas (also known as carbon dioxide equivalent) under scope 1n and 2. Under scope 3 upstream 307,800 tons were reported (259,900 tons 2022) and 879,500 tons for scope 3 downstream (776,800 tons 2022)
- Metric 2 is the carbon footprint of NOW: Pensions corporate equity exposures: This is 63.1 tons of greenhouse gas per million pounds invested for scope 1 and 2 versus 71.3 tons in 2022. For scope 3 upstream emissions 135.9 tons were recorded (112.5 tons in 2022) and 388.4 tons scope 3 downstream emissions (336.4 tons in 2022).
- Metric 3 is the investments we have made with an explicit sustainability objective: This includes green and sustainable bonds, lower-carbon ESG-screened equities and environmentally aware cash investments. Currently 82% of NOW: Pensions’ investments meet this criteria, improved from 56% in 2022.
- Metric 4 is the percentage of assets under management within NOW: Pensions’ corporate investments with science-based targets in place: This currently stands at 24%.
Climate change is among the core sustainability issues which inform NOW: Pensions’ investment strategy. Its three priority sustainability issues are climate action, gender equality and living wages.
Within its investment strategy, NOW: Pensions has increased its corporate physical equity investments and decreased its derivative investments. This has led to minor changes in its regional allocations. It has also made sectoral changes within the portfolio in response to wider economic pressures, such as inflation and higher interest rates.
NOW: Pensions has also introduced a decarbonisation framework over the last year, in conjunction with its investment manager Cardano. The framework monitors progress to reduce the emissions in the business’ investment portfolio and the wider economy. NOW: Pensions actively reviews this via its investment allocations to help meet its ambitious decarbonisation targets
It now has a total of 23 green, social or sustainable bonds which make up over 15% of its portfolio, up from 13% last year. The range includes 18 green bonds, four sustainable bonds and one social bond.
NOW: Pensions continues to promote an active stewardship role, implementing a standalone stewardship policy** in 2023 which helps to ensure the responsible oversight of the companies it invests in. It actively engages with companies to support – and if necessary, require – them to transition to a lower-carbon business model. The business believes that this active approach is more effective to serve the best interests of members and society than disinvesting from less sustainable companies.
Patrick Luthi, CEO of NOW: Pensions, comments: “While the last twelve months has been a test of resolve for many on sustainability, our conviction and commitment have not changed. As well as managing short-term risks, we are continuing to invest with our members’ long-term financial position in mind to deliver a more sustainable society. We’re proud to have made significant progress with the proportion of investments that explicitly include sustainable objectives, which now makes up 82% of the investment portfolio.
“We remain resolute in the aims we set out in 2017 when we began investing in green, social and sustainable bonds and we are pleased these now account for 15% of our portfolio. We regularly review our investment strategy and ensure that our investments align with the three priorities of our sustainability strategy: climate action, living wages and gender equality. These commitments are essential to our long-term mission to help deliver fair pensions for all.”
Joanne Segars Chair of Board of Trustees added: “We are pleased with the progress that we have been able to make over the last twelve months. The introduction of our decarbonisation framework has allowed us to increase the alignment of our investments with clear sustainability objectives. This means we are on track to hit our goal of reducing the level of greenhouse gas emissions within our portfolio by 50% by 2030.
“We know this is an important issue for our members too. Earlier this year we carried out a series of focus groups with members and employers to better understand their views on sustainability.
“The results showed an increasing awareness of corporate social responsibility and ESG. Some members felt that some investments are morally wrong, such as specific products like weapons and tobacco, but also recognised that divesting from fossil fuels is not always straightforward.
“A key learning, and next step for NOW: Pensions, is to consider improvements on how the scheme and industry more broadly can improve communicating responsible investment to members and employers.”
Notes to Editors
For more information, please contact:
Libby Wallis/Will Todd
07581 205 660 / 020 7457 2020
** Stewardship Policy 2023: https://www.nowpensions.com/resource/stewardship-policy
Sustainability at NOW: Pensions: https://www.nowpensions.com/about-us/our-sustainability-focus
About NOW: Pensions
NOW: Pensions is an award-winning UK workplace pension provider. We look after the pension savings of millions of members on behalf of tens of thousands of employers from a wide range of industries.
We have a clear mission – to help everyone save for a more financially secure future. This means achieving the best financial outcomes for our own members, while fighting for a fair pension system to enable all pension savers to enjoy the retirement they deserve. We do this by highlighting pension inequalities and campaigning for change.
We are the UK’s third largest auto enrolment pension provider by number of members.
NOW: Pensions is part of the Cardano Group, a market leader in providing risk and investment management services designed to make pensions outcomes more stable and robust.
What is the TCFD?
The Taskforce for Climate-related financial disclosures (TCFD) was established in 2015 by the Financial Stability Board (FSB). It is an industry led reporting framework setting out recommendations for companies and investors to organise and standardise their climate disclosures.
It was set up because the TCFD considered:
- The financial risks and opportunities posed by climate change are not fully understood or priced by financial markets
- Corporate and financial institutions are not prepared for the transition to a low-carbon economy which will lead to misallocation of assets, the risk of asset stranding, and market volatility – in other words, costs to long-term savers