Nest has announced a new Climate Change policy to decarbonise its investment portfolio.

The policy aims to align Nest with the Paris Agreement goals to keep global temperature rises within 1.5C above pre-industrial levels by 2050. It sets out a goal of being net-zero across all investments by 2050 or earlier, with the expectation that carbon emissions in its portfolio will halve by 2030.

To help achieve this Nest is making a series of immediate commitments:

  • move £5.5 billion of equity into climate aware strategies, representing 45 per cent of our entire portfolio. This will immediately reduce our carbon footprint by the equivalent of taking 200,000 cars off the road
  • begin divesting from companies involved in thermal coal, oil sands and arctic drilling and be completely divested by 2025 at the latest, unless they have a clear plan to phase out all related activity by 2030
  • invest a greater proportion of its funds directly in green infrastructure, building on the £100 million Nest has already invested in renewable projects across Europe
  • actively pressure companies to align with the Paris goals and divest from companies that show little progress following sustained engagement
  • commit fund managers to making progress against set benchmarks, including analysing how we can halve our emissions by 2030

Mark Fawcett, Nest’s Chief Investment Officer, believes the announcement sends a strong and clear message of the seriousness Nest places on tackling climate change, particularly following the economic impact of coronavirus.

Just like coronavirus, climate change poses serious risks to both our savers and their investments. It has the potential to cause catastrophic damage and completely disrupt our way of life. No-one wants to save throughout their life to retire into a world devastated by climate change.

“As the world’s economy slowly recovers from coronavirus, we want to ensure this recovery is a green one. 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.

“Not only is this the right thing to do, it’s also what our savers want and expect from us. How can we offer them the prospect of a better retirement if we ignore the world they’ll be retiring into?

New survey data conducted by YouGov*, shows that UK consumers want the recovery from coronavirus to be a green one and expect their pension schemes to be playing a part.

  • 4 out of 5 adults (79%) believe it’s important the economic recovery from coronavirus should take climate change into account.
  • 65% of pension savers believe their pension should be invested in a way that reduces the impact of climate change. Just 4% strongly disagree.
  • over half of all adults (57%) are worried about the impact of climate change on their lives, more than the proportion who are worried about the personal financial impact of coronavirus (51%).

While most pension savers (65%) agree that their pension should be used to tackle climate change when asked, only 1% have made a change in the last year in the way their pension was invested.

Many are put off checking if their pension is invested responsibly, for a variety of reasons; 15% of savers said it was too complicated or difficult to know how to do, while some (17%) didn’t know they could change funds. A quarter (25%) assumed their money was already being invested responsibly, with almost two in five (38%) having simply never thought about it.

There may also be a big mismatch in pension savers’ understanding of the role their pension could play in tackling climate change, with nearly two fifths (38%) not knowing their pensions are invested, at least partially, in stocks and shares.

This suggests pension schemes have a responsibility to put tackling climate change at the heart of their default strategies, rather than expecting consumers to make ‘green’ fund choices. Investing in a greener world is a financial and social imperative, as well as being what savers want and expect.

Read the new climate change policy in full.

*YouGov survey: All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2010 UK adults, of which 1,183 who have a pension. Fieldwork was undertaken between 16th – 17th July 2020.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).