first_imgNEST has also committed to divest by set dates companies involved in thermal coal, oil sands and arctic drilling. It said that by the end of this year it will sell any holdings it has in companies with more than 20% of revenues from these activities and be completely divested from any companies involved in such activities by 2025 at the latest, unless they were committed to a “full, accountable phase-out by 2030 at the latest”.NEST told journalists the divestment policy applied to equities and fixed income.With regard to companies that NEST will remain invested in, the pension scheme said it would increase pressure on the largest carbon emitters and those who finance them via shareholder voting and collaborations with other institutional asset owners.It will consider divesting where its engagement has been unsuccessful, “usually only after several escalation options have been explored”.The scheme is also embedding its new policy in fund manager selection and monitoring, saying it will expect all fund managers to develop a strategy to align the portfolio they manage for NEST with the 1.5°C global warming limit, which will include analysing how NEST can halve emissions associated with its portfolio by 2030.This will be a requirement for all new mandates, while incumbent managers will have three years to demonstrate meaningful progress against defined benchmarks or risk losing the mandate.“We’ll use our close partnerships with fund managers to amplify our impact and coordinate activities towards meeting the Paris Agreement goals.”Mark Fawcett, NEST CIONEST is also looking to invest a greater proportion of its funds directly in green infrastructure. According to CIO Mark Fawcett, it is in the shortlist stage of its infrastructure equity manager search for three mandates, one of which is exclusively for renewable energy.“As the world’s economy slowly recovers from coronavirus, we want to ensure this recovery is a green one,” he said. “We have a unique opportunity to support sustainable growth and transition towards a low-carbon economy.“We believe our new policy sets out a clear vision of where we’re heading. We’ll now work on taking the necessary steps to become net-zero, using our close partnerships with fund managers to amplify our impact and coordinate activities towards meeting the Paris Agreement goals.”‘Disappointed’ by UN asset owner group fee The aim of NEST’s new policy is similar to if not the same as the objective of the UN Net-Zero Asset Owner Alliance, a group that now counts 27 major institutional investors since launch last autumn.Asked why NEST was not joining the UN group, Diandra Soobiah, head of responsible investment at the DC provider, indicated it was put off by the expense involved.“We were quite disappointed that there was a large fee,” she said.A spokesperson for NEST told IPE that as a not-for-profit organisation currently being funded through government loans, “we need to be prudent with any expenditures and to be clear on the exact benefits it will bring our members”.“Another key point is that there are a lot of really good free initiatives so we don’t feel the need to pay for research and resource that’s readily available to us,” the spokesperson added.The move by a growing number of investors to align their investments with the goals of the Paris Agreement, in particular the more ambitious 1.5°C target, comes as methodologies are still being developed to assess portfolio alignment with a particular temperature goal.NEST’s Soobiah said the pension scheme was doing a lot of work with groups like the Principles for Responsible Investment (PRI) and the Institutional Investors Group on Climate Change. NEST has been involved in the latter’s asset owner project to develop a common understanding of what aligning with the Paris Agreement means in practice. The outcome of that work is due to be presented soon for consultation.“We’re feeding into this conversation on how we can develop methodologies for 1.5°C alignment,” said Soobiah.She also said NEST was engaging with the PRI “to ensure we have input into [the UN Net-Zero Asset Owner Alliance] and we’re not missing out on key areas of research that’s coming from that group”.The membership fee for 2020 for the UN Net-Zero Asset Owner Alliance is €20,000 per annum. A spokesperson for the PRI, one of the convenors of the UN group, said the fee had not been an issue for the vast majority of investors the coalition had engaged with so far. PRI CEO Fiona Reynolds added: “The UN Net Zero Asset Owner Alliance is perhaps the most exciting climate initiative of the 2020s because asset owners aren’t just asking companies to commit to a Paris aligned world, they are committing to make their entire portfolio net zero by 2050 and to hold themselves accountable via short-term measurable targets, not only to their own beneficiaries, stakeholders and industry peers but also to the finance sector as a whole and most importantly, wider civil society. “This has not been done before.”She also said there was a lot of work involved in pursuing this goal, and that the fees helped pay for the research and coordination involved in getting to net zero by 2050, with none of these projects achievable without funding.“We would welcome NEST to the initiative,” Reynolds added. Looking for IPE’s latest magazine? Read the digital edition here. UK defined contribution (DC) master trust NEST has adopted a climate change policy aimed at aligning its portfolio with the goal of keeping global temperature rises within 1.5°C above pre-industrial levels.Based on projections by the Intergovernmental Panel on Climate Change, achieving this would entail reducing to net-zero the greenhouse gas emissions associated with its portfolio by 2050. NEST said it expected this would in turn mean these emissions would have to halve by 2030.The £12bn (€13bn) DC provider is setting out to reach its objective by way of its asset allocation, stewardship, fund manager selection and monitoring, and public advocacy.As concerns asset allocation, it is moving all of its developed market equity, representing £5.5bn and 45% of its portfolio, into its “climate aware” index fund strategies, and will later this year also set up a climate aware fund for emerging market equity.last_img