PLSA ESG 22: Net-zero commitments a ‘great start’ but interim targets crucial

Long-term net-zero commitments are a “great starting point”, but pension schemes and companies should consider setting short-term targets to ensure they are on the right trajectory, according to Legal & General Investment Management (LGIM) head of DC investment strategy, Veronica Humble.

Addressing the PLSA ESG Conference 2022, Humble said that, despite criticism that they are not enough, long-term net-zero commitments were a “very good first step”.

“We can’t do the next steps without them [net-zero targets],” she continued.

“It is crucial to follow the best standards in the market, to do the Paris-aligned trajectory of at least halving emissions by 2030 in your portfolios.

“But also consider the even more interim goals, as 2030 is eight years away. We have 2025 commitments across our default funds.”

LGIM noted that its ESG research last year found that one in in 10 of its surveyed members had heard of the term net zero and understood how it related to where their pension was invested.

However, referring to research from this year, Humble stated that it was “remarkable” how much awareness had changes.

“Only 17 per cent of the members we surveyed [this year] had not heard of the term net zero, so that’s a massive change,” she said.

“We are seeing brilliant progress. What we are also seeing is there is much more focus on how we actually explain this to members. We have just revamped our ESG hub and we are seeing a lot of demand from clients.

“It was great to see the reaction to COP26, which we were seeing in real time through our voting platform Tumelo, where we saw an explosion of voting on environmental issues around COP. We also saw a huge volume of members voting on diversity issues. The questions is always: is it ESG or climate? It’s both - people really care about both.”

Humble noted that a ‘shift’ had also been observed on the client side, with clients wanting to know how they can align what they are doing on the pension side to their sustainability policy, and how that is then aligned to their corporate strategy.

She also pointed to increasing awareness of the ‘S’ and ‘G’ in ESG: “There is a general misunderstanding that young people care about E and the older people do not care at all, but that’s totally not true.

“Across the board we are finding that people want their pension to be sustainable and to do good with it.”

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