NOW: Pensions has adopted a new investment strategy to accelerate climate action.
The new narrative-based scenario analysis, outlined in its Task Force on Climate-Related Financial Disclosures (TCFD) report, reinforces that a 3°C or higher warming scenario would be catastrophic for most investment portfolios as the systematic economic consequences would likely be dire.
NOW: Pensions added that the new strategy strengthens the master trust’s commitment to make a real-world impact by stewarding its company holdings in a way that will contribute to limiting global warming to 1.5-2°C by 2050.
As part of the change in its investment strategy, the master trust’s global equity investments are managed directly by its in-house investment manager, Cardano.
This, according to NOW: Pensions, allows the master trust to have direct engagement and influence on its company holdings and can support these companies in their transitions to net zero or if there is no credible transition plan, choose to disinvest.
Overall, around 60% of NOW: Pensions’ Diversified Growth Fund is now invested in an equity strategy that seeks to support the transition, around 11% is in sustainable and green bonds and around 4% is in a corporate credit strategy that seeks to support the transition.
Consequently, 100% of its physical global equity company holdings and 76% of total holdings directly link to the trustee’s responsible investment objectives, NOW: Pensions said.
SBTi commitment
NOW: Pensions said the new strategy has allowed the master trust to increase the level of investments within its portfolio that have targets in place approved by the Science Based Targets initiative (SBTi).
Under the new strategy, 43% of the global equity company investments now have a SBTi approved target, representing over 30% of the overall portfolio.
NOW: Pensions added that there also has been good progress on the reduction of the carbon emissions intensity of its portfolio in line with its 2050 net-zero target.
It detailed that the carbon footprint of its portfolio is 52.0 tons of greenhouse gas per million pounds invested for Scope 1 and 2 in 2024, down from 63.1 tons in 2023. For Scope 3 emissions, 390.8 tons were recorded, down from 524.3 tCO2e in 2023.
NOW: Pensions said that as a result of changes to its investment strategy, its holdings now have a lower carbon impact. And it is on track to achieve net zero by 2050 and a 50% reduction by 2030, based on 2019 levels.
Martyn James, director of investment at NOW: Pensions, said: “Earlier this year we took the decision to implement a new investment strategy to our portfolio. This was set, not only with the ambition of improving performance and value for money for our members, but to also comprehensively improve our sustainable approach to investment.
“This new approach is strongly linked to our conviction and the principles of our trustees, to deliver a scheme that puts sustainability at the heart of its investment approach.”
Keith Guthrie, head of sustainability, added that the change to an equity strategy allows improved stewardship, helping to deliver improved financial outcomes and contribute to a more sustainable economy.
“As our strategy becomes more embedded, alongside our ability to play a more active role in our stewardship and influence with the companies we invest in, we believe we can move closer to achieving real-world decarbonisation as a result of companies reducing their emissions,” he noted.
Guthrie added that while NOW: Pensions would like to see the world decarbonise more quickly than 2050, the reality is that global emissions have “yet to peak”, let alone decrease in line with the pathway the scheme set out.
He said: “As a result, an important part of NOW: Pensions’ strategy is to remain invested and engage with those high emitters of today whom we believe can develop credible plans to achieve net zero by 2050. With its new investment strategy, we are able to do that.”
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