Aviva announces net-zero default and urges same requirement for all AE funds

The provider said it is committed to making progress towards the 2050 net-zero target - which is aligned to the Paris Agreement and the UK government's target - as quickly as possible and is exploring the feasibility of a 2030 target.

The insurer plans to invest more than £5bn into low-carbon equities and climate-transition strategies across its default funds over the next 18 months in order to achieve the target.

Research by the firm revealed 77% of those due to retire in the 2050s are concerned or extremely concerned about climate change, while 56% agreed that the government should require default pension funds to achieve net zero carbon emission status by 2050.

While the government is legally bound to achieve net-zero emissions by 2050, Aviva is calling on it to pass a law requiring AE default pension funds to achieve net-zero carbon emissions status by 2050 to help to address the challenge of climate change.

The firm has requested the government amend the Pension Schemes Bill - which is due to go before the House of Commons for its second reading on 7 October - to include this law.

Aviva's research also found the majority of millennials (71%) would invest through their workplace pension in an ESG- or ethical-focused fund if it was available.

Chief executive of savings and retirement Lindsey Rix said: "The vast majority of savers are invested in a default fund - a fund which may take little account of climate change.

"The government's requirements for schemes to report on their exposure to climate change is a positive move, but we have a responsibility to go even further for our customers and the next generation of pensioners."

Rix continued: "We are working hard to offer more customers a simple and effective way to invest their money in a way that helps them to save enough for their retirement while also being good for the environment.

"We believe now is the time to go further. Climate change poses a significant risk to people's pension savings and our research shows that people want pension funds to help tackle climate change and want the government to act. This is particularly true for those due to retire in the 2050s.

"That is why we are setting a target for our own AE default funds to be net zero by 2050. We also want to progress towards the net-zero target as quickly as possible and we are exploring the feasibility of a 2030 target in line with the Intergovernmental Panel on Climate Change's 1.5-degree pathway. This is a challenging target, but we believe it is the right thing to do.

"However, if the UK is to meet its climate change targets, others must act too. We therefore call on the government to legislate to ensure that all AE default pension funds become net-zero by 2050." 

This comes after the launch of the Make My Money Matter pensions campaign which was set up to help make the UK's £3trn of pension assets more sustainable and ensure it is invested in building a better world after the coronavirus pandemic.

Co-founder Richard Curtis offered support for Aviva's move.

He said: "We welcome Aviva's leadership with the important commitments made today. With two of the UK's leading pension funds now committed to net zero, that's 13 million pension pots tackling the climate emergency.

"However, there's much more to do. That's why Make My Money Matter is calling for all pension funds to match Aviva's leadership and commit to net zero, with a halving of emissions by 2030. That's the only way to ensure that our pensions are not only saving for our futures, but building a world fit for our retirement."

In July, Nest set out plans to move its default pension strategy towards a net-zero investment portfolio by 2050, with at least £5.5bn of equities pledged to climate aware strategies, while Hymans Robertson pledged to cut its scheme's carbon footprint by a third.

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• Topics
• Defined Contribution
• Industry
• Paris Agreement
• Pension Schemes Bill
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• Make My Money Matter