Nest announces climate strategy to support £450m emerging market investment

Nest has announced a new climate strategy to support plans to nearly double its investment in the "exciting growth area" of emerging markets.

The strategy will mean that more than half (51 per cent) of the scheme’s overall portfolio, representing nearly £8bn, will be in dedicated climate-aware strategies as of February 2021.

It will also support plans to nearly double the scheme's investment in emerging markets, increasing from around £480m as of September 2020 to an estimated £930m by February 2021, equal to 6 per cent of the scheme’s total portfolio.

The strategy will track a customised index, produced in collaboration with Northern Trust Asset Management, to tilt investment in companies based on a score, which will be calculated on energy efficiency, alternative energy and green building.

This will allow Nest to reduce investment in companies with large oil or gas reserves and those with a high carbon intensity, whilst also increasing investment in clean technology and renewable energy opportunities.

Nest has confirmed that it will continue to review and update the methodology behind the fund, in order to evolve the criteria and move closer to delivering the Paris Agreement goals over time.

Nest head of responsible investment, Diandra Soobiah, commented: “Over the next 10-20 years, countries like China and India are expected to see huge increases in urbanisation.

“Many emerging economies are also thinking hard about how to harness green technology to fuel their growth and leapfrog the dirtier industrialisation trends of the past. This presents opportunities for investors.

“We’re therefore delighted to announce our new strategy, formulated closely with Northern Trust Asset Management, to expand our investment in emerging markets while targeting green opportunities and managing climate-related risks.

“It’s crucial that investors in such a strategy are active stewards for companies in emerging markets. We’ll encourage companies to prepare for the low carbon transition to ensure they remain attractive investments for our members.”

Northern Trust Asset Management head of asset management, EMEA, Marie Dzanis, added: “We at Northern Trust Asset Management believe this will be a decade of sustainable investing.

“We are delighted to work with Nest, who dedicate nearly half their portfolio to climate-aware strategies, and celebrate that they are at the forefront of innovation.

"Our work with Nest aligns to our philosophy and dedication to furthering investor access to climate-aware strategies."

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