The BT Pension Scheme (BTPS) has become the latest pension fund to commit to a net-zero investment strategy by a fixed date in order to mitigate the financial risks from climate change.
The £55bn scheme said it was targeting a net-zero strategy by 2035, aligned with the Paris Agreement goals, across all three scopes covered by the Greenhouse Gas Protocol, an international accounting tool which reflects direct emissions and indirect emissions from purchased energy and the company's value chain.
It is the latest in a line of pension schemes to announce similar decisions on climate change-related risks this year as the sector faces growing government, regulatory, and member demand to manage the financial risks associated with the anthropogenic consequences of the environmental crisis.
Yesterday the South Yorkshire Pensions Authority said it was aiming to be carbon neutral by 2030, and Aviva last week set a 2050 net-zero target for its auto-enrolment default funds and urged others to follow. Over the summer Nest said it would transition its default pension strategy to a net-zero portfolio by 2050, while Scottish Widows invested £2bn in a climate transition fund and announced disinvestments in some fossil fuel activities.
The BTPS said it had set the goal in order to "limit the risk" posed by climate change on meeting its long-term commitments, while 74% of members had said they expected the scheme to continue taking into consideration the environmental and social impact of its investments. Two thirds said they expected the scheme's investments to be used to make a positive impact on the environment and society.
BTPS chairman Otto Thoresen said: "Climate change poses a clear and present threat to the scheme's ability to meet its long-term commitments. Continued increases in global warming will amplify existing risks and create new risks with potentially irreversible and catastrophic impacts on markets, society and the environment.
"Setting a net-zero goal of 2035 is ambitious but we believe the time to act is now and we hope that others will join us in setting their own net-zero goals."
In order to achieve the goal, BTPS said it would use the opportunity arising over the next 15 years from its maturing membership to reallocate assets to companies with lower emissions and focused on transition solutions. It will also align new and existing mandates objectives with the net-zero goals, selecting and retaining managers that will deliver required investment performance while reporting against climate change targets with a net-zero climate scorecard.
A revised voting policy will also be introduced and the BTPS will team up with other schemes and stakeholders to advocate for action to achieve net zero from policymakers, regulators, governments, and other relevant organisations.
BTPS Management chief executive Morten Nilsson said the pandemic also presented an opportunity to "do things differently" as the economy and society rebuilds.
"Over the next 15 years, the scheme will be reinvesting the majority of its assets and, as we look to deliver the best returns, we must not waste this opportunity to support a cleaner and greener future," he said.
"Asset owners are uniquely placed to use their influence to drive decarbonisation and influence who has access to capital by setting targets to tackle climate change. But we cannot achieve this goal alone.
"Data on emissions needs to improve and companies, governments, and consumers must act. Standing by and doing nothing is no longer an option."
Since 1 October this year, schemes have faced additional ESG reporting requirements within their statements of investment principles, while also publishing annual implementation statements on how they have followed through on their ESG and stewardship policies.
A government consultation on requiring the largest pension schemes and all master trusts to report in line with recommendations from the Taskforce on Climate-related Financial Disclosures also closed yesterday.
Pensions and financial inclusion minister Guy Opperman said: "The UK was the first G7 country to legislate for net zero and I warmly welcome the BTPS' commitment to achieving their own net-zero target by 2035. This is an encouraging sign of how government, industry and investors can work collaboratively to build an appropriate regulatory framework and promote sustainable investment opportunities as we build back better, and greener."
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