Cushon master trust overhauls net zero strategy

In 2021, UK master trust Cushon made headlines with its Net Zero Now strategy, which used a combination of environmentally friendly investments and carbon offsets which, according to the provider meant that the strategy was carbon neutral.

Cushon, which manages £1.7bn in assets prides itself in being an early adopter of both private market investments and carbon offsets. But this approach is undergoing some changes. The master trust now says that it will no longer include carbon offsetting assets in its net zero calculations, which means it no longer describes instead as carbon neutral.

Having said that, the master trust is by no means ditching its climate ambitions, as Julius Pursaill is keen to stress. While the Net Zero Now strategy has been popular with employers, he acknowledges: “consensus has shifted to exclude offsetting from net-zero calculations in order to promote the abatement of avoidable emissions. We have always said abatement is the most important route to achieving the Paris climate goals, and so, we are putting all efforts into driving down the underlying fund’s footprint.

Pursaill also emphasizes that the master trust has succeeded in driving down its Scope 1 and 2 emissions at a faster than anticipated rate. It now aims to achieve an 80% reduction of its ambitions by September 2030.

While the Net Zero Now strategy is closed to new members, existing members will see no changes, Pursaill said. This means that the master trust does not intend to sell its carbon off sets: "The offsets purchased for Net Zero Now members were purchased by Cushon on our own balance sheet and were therefore never part of fund assets. They are used to cancel fund emissions as a cost to the business. We did not buy and sell them to generate returns within the fund” he explained.

Carbon controversy

Cushon’s change in strategy comes amid growing political controversy about the use of carbon offsets. The European Union announced in September that it intended to crack down on carbon neutral claims based on carbon offsetting.

But Pursaill argues that given the ongoing reliance of the world economy on fossil fuels, there is still a place for carbon offsetting: “There is no path to achieving the Paris climate goals that does not include offsetting of unavoidable emissions in the future. We are exploring the possibility a natural capital mandate, whereby Cushon Master Trust (the fund) could invest in carbon sequestration projects – for example through forestry – to generate carbon credits that would be held as fund assets and be sold in due course to generate positive returns.”

Net Zero Investor's Annual Conference | 11th December 2023 | London

Going forward, private market investments in climate solutions will also play an increasingly important role, says Pursaill. Cushon is one of the first UK DC providers who have invested in private markets.

Among others, it has invested in sustainable faming technology in the UK whereby greenhouses are being heated recovered from wastewater processing.

The investment also focusses on sustainable water usage in farming, it employs a hydroponic irrigation system and rainwater recovery which uses 10 times less water than field farming.

But the master trust's new bold zero targets come with a warning: While it is on track to meet its 80% emission reduction targets, the remaining 20% of emissions are not in the master trusts’ control as they are a systemic issue of business continuing to operate within a fossil fuel reliant economy.

It emphasises that ending the global economy’s reliance on fossil fuels required “unambiguous policy intervention” and a much closer collaboration between policy makers and industry.

Julius Pursaill is a speaker at Net Zero Investor's Annual Conference on 11 December at the London Stock Exchange. Further information about the event can be found here.