Aviva sets 2050 net-zero target for pensions, urges Government to force others to follow suit

Aviva has committed to ensuring that companies held in its auto-enrolment default pension funds generate net-zero emissions by 2050 – and urged the Government to make this a unified commitment across the sector.

In order to reach the new target, the company will develop sector-specific climate transition strategies for its holdings over the next 18 months. The strategies will outline the roles which divestment and engagement will play in Aviva’s approach.

Once the strategies are developed, Aviva has vowed to explore the feasibility of interim targets. It said in a statement that it would like to commit to reducing emissions by at least half by 2030, in line with the recommendations of the IPCC’s landmark report on climate change.

Aviva has also committed to investing £5bn in low-carbon equities such as renewable energy and electric vehicles by mid-2022. It already has one default pension fund with above-average ESG performance – its Stewardship fund – but wants to expand this approach.

In tandem with the announcement of the new targets, Aviva made a call for Ministers to include a requirement that all auto-enrolment default pension funds are net-zero aligned in the forthcoming Pension Schemes Bill. The Bill is due for a second reading in the House of Commons next week. At present, its main climate provision is a new mandate requiring large pension schemes to disclose the climate-related risks posed to assets in their portfolios by the end of 2022, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

“The Government’s requirements for schemes to report on their exposure to climate change is a positive move, but we have a responsibility to go even further for our customers and the next generation of pensioners,” Aviva’s chief executive officer of savings and retirement Lindsey Rix said.

“Climate change poses a significant risk to people’s pension savings and our research shows that people want pension funds to help tackle climate change and want the government to act. This is particularly true for those due to retire in the 2050s.”

On her latter point, Rix is referring to Aviva’s recent poll of 3,000 adults in the UK. The survey found that six in ten people think it is important that their pension funds are invested in a way that helps with climate mitigation and adaptation. Moreover, more than half (56%) of respondents said that the Government should require default pension funds to achieve net-zero carbon emission status by 2050.

Separately, a recent YouGov survey of more than 4,400 Brits found that 72% do not know whether their pension is invested in line with their values.

In for a penny…

Following months of demonstrations from green groups like Extinction Rebellion and charities like ShareAction, a campaign was recently launched to get the £3trn managed by the UK’s pensions sector invested in a net-zero-compatible manner. Called Make My Money Matter and spearheaded by Comic Relief co-founder Richard Curtis, it is being backed by the likes of the Environment Agency Pension Fund, Oxfam and WWF.

While Pensions Minister Guy Opperman has repeatedly disagreed with suggestions that divestment should be mandated, the UK’s largest pension scheme in terms of membership, Nest, is voluntarily divesting from any large business that derives at least 15% of its turnover from these fossil fuels. Similar divestment initiatives have been announced by the Church of England and by several of the UK’s higher education bodies, including Oxford University, the University of Manchester and the University of Gloucestershire.

The University of Cambridge this week became the latest higher education body to join that cohort, following years of direct action from students and green campaign groups. It will divest its £3.5bn endowment fund from fossil fuels by 2030.

Sarah George