Closing the ‘green pensions gap’: Scottish Widows targets net zero across £170bn fund range by 2050

by | Feb 8, 2021

  • Scottish Widows is first major UK provider of pensions and insurance to target net zero by 2050 across its entire portfolio of investments, supported by clear milestones.
  • The company will also aim to halve the carbon footprint of its investments by 2030
  • This almost doubles the meaningful commitments the UK pension industry has made to net
    zero goals, but a massive £2.17 trillion gap remains

Scottish Widows today becomes the first major pensions and insurance provider to target halving
the carbon footprint of all its £170bn investments by 2030 in its path to net zero by 2050.

The company – which has more than six million customers in the UK – will also be investing billions
of pounds in climate solutions, such as renewable energy, low carbon buildings, and energy efficient
technologies, by 2025 to underline its commitment to positive change.
The ambitious move almost doubles the meaningful commitments* the pension industry has pledged
to reaching net zero targets, in line with the goals of the Paris Agreement.**
Moving to net zero will safeguard customers’ investments in the long‐term from the risks associated
with climate change while taking advantage of related investment opportunities. This will ensure
Scottish Widows continues to meet its core purpose of looking after its customers’ savings, as well as
helping to power the UK’s transition to a green economy.

However, a giant £2.17trn ‘green gap’ remains as the overwhelming majority of the country’s
pension funds and providers have yet to outline meaningful plans to move their investments to net

Scottish Widows, part of Lloyds Banking Group, said the road to net zero would be complex but it
was the right thing to do for customers, for the country and the environment.
The pensions firm is calling on the rest of the industry to urgently close the ‘green gap’ and commit
to net zero with a clear path to get there ahead of the COP26 global conference on climate change
later this year. Pension providers need to shift from the current piecemeal approach, to a wholesale
net zero investment strategy with clear shorter‐ and medium‐term milestones that are understood
by the public, customers and policymakers.

Maria Nazarova‐Doyle, Head of Pension Investments at Scottish Widows, said:

“Our first responsibility is always to our customers and ensuring we are looking after their
investments for the long‐term. Moving to net zero will protect savings against climate‐related risks
and uncertainty and offer longer‐term sustainable growth by accessing low carbon transition
“To get there we must set shorter‐term targets. Carbon emissions need to halve between now and
2030 or we won’t stand a chance of meeting the longer‐term net zero goal.
“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. A company of our scale
cannot rely on mass carbon offsetting schemes to provide a false sense of security, or extensive
exclusion lists to get results. Action that drives change in the real economy is the only way we can
achieve the net zero goals.”

Anne‐Marie Trevelyan, Energy and Clean Growth Minister, said:
“Eliminating the UK’s contribution to carbon emissions requires urgent action across society and the
whole economy.
“Scottish Widows’ fantastic commitment will help create meaningful, large‐scale change across the
financial sector, positioning the UK as the global centre for green finance while protecting customers
and the environment from climate change.”

Scottish Widows’ approach follows the Institutional Investors Group on Climate Change (IIGCC)’s Net
Zero Investment Framework, which it helped develop. It helps provide a clear, transparent roadmap
for net zero. Later this year, Scottish Widows will publish a target for its overall investment in
climate solutions by 2025 and the carbon footprint of existing investments.

Calling for an industry‐wide shift to net zero investments
Despite some progress being made, the overwhelming majority of UK pension providers still have no
credible net zero commitments in place, with just £177 billion in meaningful, specific commitments
to net zero by 2050 with a crucial interim target of 50% CO2e reduction by 2030, in line with the
IPCC findings.
Scottish Widows’ £170 billion assets under management almost double this total to £347 billion –
but there remains a £2.17 trillion gap***. That means 85% of pension savings are not held in funds
committed to net zero.
The targets announced today are the latest step in Scottish Widows’ Responsible Investment and
Stewardship Framework. They follow the company’s November 2020 announcement of plans to
divest an initial £440 million from companies that have failed to meet its environmental, social and
governance (ESG) standards.
Maria Nazarova‐Doyle, Head of Pension Investments at Scottish Widows, said:
“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.
“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. To help prompt the shift to a low carbon
economy, others within our sector must also make meaningful, large‐scale net zero commitments
that include a dramatic reduction in emissions, if we were to have a chance to get to Net Zero by
Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change, said:
“This is a very welcome commitment from Scottish Widows. Through setting a net zero target with a
strong short‐term target and identifying and implementing a practical approach to realising these
goals, investors play a key role in securing a sustainable and resilient future.

“We need to see investors across the entire sector align their portfolios with a net zero future.
Scottish Widows has played an important role in IIGCC’s work, developing a Net Zero Investment
Framework to make net zero alignment possible, together with over 70 of our members.”
Catherine Howarth, Chief Executive at responsible investment charity ShareAction, said:
“Kudos to Scottish Widows for their leadership in protecting pension assets, whilst also protecting the
environment their customers and clients will retire into. The commitment to halve portfolio emissions
by 2030 is especially welcome. ShareAction hopes to see many more big players in the UK’s pension
sector step up in this way by the time of the Glasgow‐hosted COP26 summit.”

* A ‘meaningful commitment’ was classed as a commitment to net zero by 2050 alongside either, an
interim reduction target for investment portfolio emissions by either 2025/2030 or a numerical
commitment to low carbon investments. Research was desk‐based and based on easily accessible
public commitments.
** This is line with the United Nation’s Intergovernmental Panel on Climate Change (IPCC)
recommendations, consistent with the Paris Agreement goal to keep global warming to well below 2
degrees Celsius on pre‐industrial levels.
***UK pension assets total an estimated $3.45 trillion (source: Willis Towers Watson, Global Pension
Assets Study 2020), converted using rate £1 = $1.37 as at 26.01.21 to £2.52 trillion. Meaningful commitments of £347 billion have been subtracted from this to identify a £2.17 trillion ‘green gap’.

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