The UK’s largest defined contribution providers have been criticised for not taking leadership on climate action and “inadequate” transition planning.
The majority of UK defined contribution providers, including Mercer, Hargreaves Lansdown, SEI and The People’s Pension have been flagged by climate campaigners for not doing enough to prepare their portfolios for the climate crisis.
Climate plans for 13 of the UK’s 20 largest DC providers have been classed as “inadequate” with only three providers, Nest, Aviva and Legal & General being listed as "adequate", according to a scorecard released by campaign group Make My Money Matter.
The research measured providers based on their commitment to limit global temperatures to 1.5 degrees, measurement and disclosure standards, detailed target setting, investments in climate solutions, fossil fuel exposure as well as exposure to deforestation and stewardship efforts.
It found that while some DC providers have made significant advances on stewardship, it called out in particular their continued exposure to fossil fuels. The report said that only four DC providers currently have restrictions on fossil fuel investments in place. It also found that around half of all providers had at least adequate investments in climate solutions.
The findings largely chime with research produced by Net Zero Investor last month, though a review of provider's TCFD reports illustrates that many are actively working on reducing their carbon footprint.
Net Zero Investor research found that most now have a clear fossil fuel phaseout target but there are significant differences in their approach to short-term targets – specifically the 2030 target.
The average master trust said they would educe 50% of their portfolio emissions by 2030, on a 2019 baseline. However, some funds are more aggressive (60% is what Aviva says it will achieve) while some are less aggressive (Mercer says it targets 45%).
Some even have a 2025 plan – Nest master trust is aiming to achieve a 30% emissions reduction by 2025, Smart Pension says it will cut portfolio emissions by 50% by 2025 in the default growth fund.
The People’s Partnership, the only fund in the list without a clear net zero target, told Net Zero Investor that it has a net zero ambition but that the exact implementation was still under review, given the complexity and uncertainty around carbon data at a portfolio level.
How are the UK's master trusts tackling the net zero challenge?
