COP26 climate summit: why Scottish pension funds have never had a better time to commit to net zero carbon emissions – Natalie Jackson

Pressure is mounting on investors to stop funding companies whose operations produce significant carbon emissions (Photo: Justin Tallis / AFP via Getty Images)

In response to the climate emergency, many cities, regions, businesses and investors are pledging to achieve net zero by 2050 at the latest. Nicola Sturgeon declared a climate emergency in April 2019 and the Scottish government has pledged to a net zero society by 2045 – five years ahead of the rest of the UK.

Even among those who have yet to declare a climate emergency or set a net zero commitment, there is recognition of a major problem that something urgently needs to be done about.

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So far, the commitments made by municipal leaders to act on the climate have been supported by various initiatives, such as the replacement of municipal car fleets with electric vehicles, the proposal to introduce low emission zones for greener cars and bicycle rental programs to encourage people to swap four wheels for two as they roam the towns of Scotland.

But perhaps their greatest power could be the impact of the decisions they make about where to invest retirement savings.

Scottish local government pension schemes serve over 500,000 retirees and members, the largest being the Lothian (assets of around £ 8 billion) and Strathclyde (assets over £ 26 billion). Their potential to invest for the good of the planet is enormous.

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Now, as we prepare for COP26 in Glasgow, the Scotland-based Global Ethical Finance Initiative (GEFI) is working with local government pension plans to help them overcome the challenges of their journey to zero net.

Net zero means striking a balance between greenhouse gases emitted into the atmosphere and those removed, and it is clear that one of the biggest challenges will be developing a credible plan to achieve this.

More than 80 senior financial leaders from around the world gathered last month after launching our article for pension providers and the road to net zero that lays bare the gravity of the situation. The document identifies the main challenges that pension funds face in their journey to net zero: precise and comprehensive data on the climate impact of investments; lack of knowledge of pension fund administrators and staff; and the inability to engage in climate action.

The paper examines questions such as “is divestment the answer?” And “Can pension providers ignore climate change?” “

Many climate activists are pushing plans to immediately withdraw their money from polluting companies. This could send a strong message, but we don’t think divestment is the primary strategy to use. It just shifts the problem elsewhere, and a more effective approach is active engagement to encourage positive change.

It is not only environmental activists who are calling for this action. The government and consumers want it too. In fact, one only needs to look at the policy papers of major political parties to predict that there will soon be legal and reputational hurdles to making money from investments that harm the planet.

Climate risk is a financial risk and a reputational risk. This is why the programs in Scotland should get their house in order now and, if done right, they will even have a business model and expertise to export to the rest of the world. A recent Aviva survey showed that two-thirds of millennials believe it should be mandatory for pensions to achieve net zero emission status by 2050.

GEFI has also conducted its own research in Scotland on attitudes to climate change and leadership.

The latest YouGov poll found that more than half of Scots don’t trust world leaders to come up with a solution to save the planet at the UN COP26 summit, although 60% felt the talks would be essential to cope. to the climate emergency.

Two-thirds believe Scottish financial institutions have a vital role to play in reducing emissions. More than a third said they only wanted their money to be invested in companies with a positive impact on the environment.

While confidence in world leaders is low when it comes to solving the climate crisis, it is clear that others need to step up their efforts. This is why big business and financial institutions, not only in Scotland and the UK, but around the world, need to take major responsibility.

There is a lot of green electricity in people’s pension funds, and it is time to use it more efficiently.

So what can Scottish pension providers actually do to become net zero, or at least start now on the road to it?

GEFI’s “transition roadmap” will define specific actions for pension providers so that they take action now in their climate journey.

As Adam Matthews, Director of Ethics and Engagement in the Church of England Pensions Board investment team, puts it: “Setting a long-term net zero goal is the game. easy ; the challenge is to have a credible and transparent framework that allows your fund to translate intention into practical decisions and actions.

The commitment of pension providers to this roadmap will raise Scotland’s profile as a country serious about a sustainable and even prosperous journey to net zero, and this would happen as the eyes of the world shift. are looking to an event in Glasgow to offer exactly these kinds of solutions.

Natalie Jackson is the lead author of the Global Ethical Finance Initiative, Pensions provider and the path to net zero report. GEFI is driving positive change in the financial sector to act on the United Nations Sustainable Development Goals, working with partners such as the Scottish Government and the United Nations Development Program

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