Some of the UK’s largest pension investors have written to prime minister Boris Johnson to request a meeting with him to discuss the country’s net-zero strategy ahead of this year’s United Nations climate change conference.

The asset owners also wrote to the secretary of transport, setting out key principles the government should integrate in its transport decarbonisation plan and planning for the 2030 sales ban on petrol and diesel cars in the UK.

“Climate change is recognised as the most significant global risk facing investors,” the letters state. “Even a short delay in implementing the necessary policies increases the likelihood of a disorderly transition, threatening beneficiaries’ savings and the resilience of the financial system.”

In the letter to prime minister Boris Johnson, the investors said they “strongly support the high ambition” shown in the UK’s targets under the Paris Agreement, adding that “we would welcome the opportunity to meet with you to discuss how the financial sector can contribute to the UK’s decarbonisation efforts”.

The investors welcomed recent action taken by the government, such as announcing a 68% greenhouse gas emissions reduction target for 2030 and the 10-point plan for a “green industrial revolution”, but said more information was needed from the government about how intended to deliver on its stated ambitions.

The government’s upcoming domestic net-zero strategy needed to address sustainable land use and energy efficiency improvements, they said.

The letter, convened by the Principles for Responsible Investment (PRI), is signed by the CEOs of Border to Coast Partnership; Brunel Pension Partnership; BT Pension Scheme Management; LGPS Central; Local Pensions Partnership Investments; NILGOSC, the local government pension scheme for Northern Ireland; railways pension scheme RPMI, plus the secretary to the trustees of Unison Staff Pension Scheme.

“The purpose of the letter is in part to show that there is perhaps an unrealised reservoir of support from the investor community for stronger climate action, to make that case in a way that perhaps hasn’t been made before to the highest level of government,” said Emmet McNamee, senior policy analyst at the PRI.

In addition to showing support for policy change, the letter points to investors as a source of financing.

“With public budgets under continued strain from the COVID-19 crisis, now is the time to utilise the City of London and private finance to help deliver the ambitious decarbonisation needed,” the letter stated.

“This can be done through co-designing dedicated investment funds, such as the Charging Infrastructure Investment Fund, and ensuring the new National Infrastructure Bank has a clear net zero and resilience mandate alongside supporting the levelling up and just transition agendas.”

‘Real economy policy pivot’

According to McNamee, the letter reflects the PRI’s and investors’ growing interest in the real economy, and policy influencing this.

“The letters come from a realisation that the PRI and investors have been coming to for a while, that just greening your portfolios is quite difficult without real fundamental changes to the underlying economy,” he said. “It’s possible to have a 1.5°C-aligned portfolio in technology or healthcare or green infrastructure but the performance of that portfolio can still be impacted by climate change as a systemic risk.”

The letters were also an attempt by investors to make better use of policy engagement as a tool – underutilised so far – to help drive change, according to McNamee.

Engagement with companies is arguably the best known stewardship activity by investors, and McNamee indicated that the policy advocacy investors had already been doing so far was with regard to sustainable finance, and hadn’t looked “more broadly at the underlying economy and the multifaceted way in which you need to decarbonise your portfolio”.

The PRI began to “pivot into this area of real economy policy” about six months ago, with investors taking a strong interest in the workstream and inquiring how they could get involved, McNamee said.

PRI CEO Fiona Reynolds said: “To achieve the goals of the Paris Agreement and prevent the most destabilising effects of climate change, we need not only greener portfolios but greener, decarbonised economies.

“The government and the investment community must work together to deliver that decarbonisation. We applaud the leadership the UK government has shown so far, but know that so much more must still be done.”

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