National Grid UK Pension Scheme to divest from coal by 2022; targets net zero for 2050

The National Grid UK Pension Scheme has announced plans to achieve a portfolio of assets with net-zero carbon emissions no later than 2050, or “earlier if possible”.

The scheme highlighted climate change as the “defining issue of our time”, stating that it is becoming “increasingly apparent” that the result of unchecked climate change will have negative financial repercussions for pension schemes.

As part of this strategy, the scheme has announced that it will divest from thermal coal-related assets by 2022, adding that this is not only the most carbon-intensive of energy sources, but is also the sector most likely to become obsolete.

The scheme argued that there was "no plausible path" to sustainability for the thermal coal-related market, with carbon emissions from existing and planned coal plants taking up between a half and two-thirds of the remaining 1.5°C carbon budget.

It has also announced plans to engage and collaborate with the entities in which it invests, in order to transition to a sustainable, low-carbon economy, warning however, that if engagement is unsuccessful, it will, where appropriate, take steps to divest.

In addition to this, the scheme will be setting a series of milestones and shorter-term climate-related targets, whilst also reviewing outcomes and recalibrating targets regularly to account for changes already implemented, and allow the flexibility to make changes when needed.

It will also be monitoring the asset managers running investment mandates, and requiring them to include climate-related implications in their investment processes and engage with companies on its behalf, in line with the overall principals and objectives.

Commenting in the Climate Change Strategy document, National Grid UK Pension Scheme chair, Paul Trickett, said: “We believe that, as trustees, we can better serve our members by choosing how and where we make our investments, in a way which helps to address climate change and reduces the risks associated with it. It’s in the best interests of the Scheme to do so.

"Moreover, when combined with similar actions taken by other pension funds, it presents a powerful opportunity to generate a positive impact for society more broadly, and to help to steer the economy towards lower carbon emissions in a way that will help address the climate crisis facing us all.”

The strategy was announced amid the launch of a net zero transition inquiry, from the All Party Parliamentary Group for Local Authority Pension Funds, which will examine how pension funds can contribute to a decarbonised and sustainable economy.

It also follows the launch of a Net Zero Now pension from Cushon, whilst other providers, such as Aegon, have announced plans to shift to net zero by 2050 for their default funds.

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