Pension scheme NEST withdraws investment from low carbon laggards

The pension scheme has provided an update report on its responsible investment strategy | Credit: NEST

National workplace pension scheme reveals it pumped £27m in to green economy in 2017, as it calls for firms to embrace higher environmental governance standards

NEST, the workplace pension scheme set up by the UK government, will today urge investment managers to push for higher environmental and corporate governance standards as it announces further progress against the green investment strategy deployed across its £2bn portfolio.

The National Employment Savings Trust (NEST), which provides 5.4 million UK workers with pensions under the government’s auto-enrolment scheme, revealed it has withdrawn £27.2m of investments in the past year from companies it said were not making sufficient progress towards the low carbon economy transition and therefore posed a risked to members’ returns.

The pension scheme instead ploughed the same sum into companies it said were positioned to benefit from the global low carbon economy transition, including renewables and clean tech firms such as PG&E, Iberdola, Vestas, and Siemens Gamesa, according to its 2016 responsible investment report,

It follows NEST’s decision to move significant sums into Swiss finance giant UBS’s climate-aware fund earlier in February, since which time the pension fund said it has also progressed further in tackling climate change, excessive executive pay and boardroom diversity at the same time as driving better returns for its members.

NEST said it had supported 291 votes against the management of companies it invests in by the end of the first quarter of 2017, voting independently on 18 votes, including against executive pay at Barclays and in response to “poor progress” on gender diversity at Glencore.

These votes also included 60 UBS shareholder resolutions on environmental issues – such as the request for the ExxonMobil board to report on its climate policies – in order to encourage companies to disclose how they are managing climate risks and preparing for the global energy transition, it said.

Mark Fawcett, NEST’s chief investment officer, said it was pleased to see stronger stances taken on climate change, executive pay, and boardroom gender diversity as these were proven factors in boardroom performance and company risk.

“While we’re closely scrutinising issues that pose a particular risk to our members’ pots, we’re encouraged by the step change improvement in how our fund managers are voting across the board on things like executive pay, gender diversity and climate change,” said Fawcett. “This is good news for our members and millions of other UK investors as a rising tide will lift all boats. We want to see the industry continue to work together and push for higher standards so all pension savers can benefit from a more profitable, sustainable and environmentally sound capitalism.”

The NEST report comes alongside the latest annual Dow Jones Sustainability Index (DJSI) assessment of the world’s biggest companies, the full 2017 results and component lists of which were published by investment specialist RobecoSAM today. The tool is aimed at enhancing investment decision makers.

Companies such as the aforementioned UBS Group, as well as Peugeot, Thai Oil, Allianz, LG Electronics and Royal Mail, have all been confirmed as group leaders across various sectors in the 2017 results.

Meanwhile, some of the biggest additions to the DJSI include Samsung Electronics, British American Tobacco, and ASML Holding, while energy firm Enbridge Inc., consumer goods company Reckitt Benckiser Group and mining giant Rio Tinto have all been removed from the 2017 indices.

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