Scottish Widows will aim to halve the carbon footprint of its investments by 2030 on the way to achieving net-zero across its entire portfolio of investments by 2050.
In a statement this morning (8 February) the six million customer-strong provider also said it will invest heavily in a range of climate solutions, including renewable energy, low-carbon buildings, and energy efficient technologies.
These investments will be made within the next five years on a path to net-zero that the provider said will be "complex, but the right thing to do".
Head of pension investments Maria Nazarova-Doyle said the 2030 and 2050 commitments would provide a long-term safeguard for customers' investments.
"Our first responsibility is always to our customers and ensuring we are looking after their investments for the long-term," she said. "Moving to net-zero will protect savings against climate-related risks and uncertainty and offer longer-term sustainable growth by accessing low carbon transition opportunities."
Scottish Widows' shorter-term targets, including halving carbon emissions in nine years, will be key to ensuring the path to net-zero is achievable, she added.
"To do the job properly across all our products and investments, we'll use our influence through stewardship activity to drive the transition to a low-carbon future in the real economy, while proactively investing in climate change solutions.
"The journey to net-zero will not be easy but we are up for the challenge."
Nazarova-Doyle added that mass carbon-offsetting schemes could no longer be relied upon by providers of Scottish Widows' size to provide a "false sense of security".
"Action that drives change in the real economy is the only way we can achieve the net-zero goals," she said.
A wider responsibility
Scottish Widows has also called on the rest of the industry to commit to a "clear path" toward net-zero including clear shorter- and medium-term milestones ahead of COP26 in November.
"The pensions industry holds trillions of pounds worth of investments and can play a game changing role in supporting the global economy's transition to a low carbon future, while earning sustainable returns for pension savers," Nazarova-Doyle said.
"We are making steady progress as an industry, but it's not fast enough. The reality is we still have a very long way to go to close the green gap to net-zero."
Nazarova-Doyle said "meaningful, large-scale net-zero commitments that include a dramatic reduction in emissions" could help prompt the shift to a low carbon economy.
Minister for pensions and financial services Guy Opperman said he applauded the provider for it's "ambitious" commitment.
"It is particularly encouraging to see these targets applied across the company's entire investment portfolio, because, too often, net-zero pledges have only applied to certain products," he said. "The worst examples are cynically designed to increase sales of net-zero products to some customers, whilst continuing to offload climate damaging funds to others."
A planned approach
Scottish Widows' approach toward achieving net-zero follows the Institutional Investors Group on Climate Change's net-zero investment framework. The provider is set to publish a target for its overall investment in climate solutions by 2025, alongside the carbon footprint of existing investments.
The targets come almost a year after Scottish Widows unveiled its responsible investment and stewardship framework - which aims to provide greater transparency on how it will develop its investment fund range and manage ESG risks - and its specialist responsible investment team, led by Nazarova-Doyle, to monitor sustainable activity across its fund range.
Scottish Widows also invested £2bn of pension fund assets last August to become the inaugural investor in BlackRock's authorised contractual scheme (ACS) Climate Transition World Equity Fund. The provider then began work with its fund management partners in November to divest at least £440m from companies which do not meet its ESG standards under a new exclusions policy.
