Pension schemes are increasingly investing with climate targets in mind

14 August 2024

Written by Retirement Line

New research has found a 23% increase since 2021 in investments with climate targets among defined contribution (DC) pension schemes.

The research was carried out by Barnett Waddingham, a leading professional services consultancy whose specialities include pensions and investments. 

Their head of DC investment Sonia Kataora says: “With demand for sustainable investment showing no signs of slowing, it’s encouraging to see that schemes are listening and driving positive outcomes for members.”

Aiming for net zero

The research also found that DC pension schemes have their sights set on net-zero. This is where companies in which schemes are investing aim to balance greenhouse gases going into the atmosphere by removal of gases from it. 

Researchers report that 86% of DC pension schemes have set targets to reach net zero by 2050, with 18% of these aiming to do so by 2040. Furthermore, of the schemes with net zero targets, 81% have interim targets, sometimes looking to achieve a 50% reduction in emissions by 2030. 

Sonia Kataora says: “Reaching the ‘holy grail’ of net zero will by no means be an easy feat for schemes, so the fact that the vast majority have committed to this target – but also set interim goals – is certainly a sign that we are moving in the right direction.”

However, the story is a little different for investments in the ‘at retirement’ phase, where members are by default moved to lower-risk investment strategies as they approach retirement. At this stage, schemes are less likely to focus on net zero targets.

About the research

Barnett Waddingham analysed 22 default strategies at the UK’s leading DC workplace pension providers. These default strategies are funds where most scheme members choose to invest their pension savings. They provide an investment option for members who are unable or unwilling to choose their own individual investment strategy.

Source:

Research into DC schemes investments: DC pension schemes see rise in investments in assets with climate targets. Money Marketing. Accessed 01 August 2024.