Aviva has been identified as the company with the best climate actions and performance, but some areas within the insurer’s practice are still deemed inadequate, according to analysis. 

Despite almost all life insurers and pension providers having publicly set net zero targets, there are “significant failings in their detailed climate plans”, according to pension campaign group Make My Money Matter: “Not one provider was deemed to be taking a leadership role on climate action.”

MMMM’s analysis, in partnership with sustainability research provider Profundo, examines the climate plans of the top 20 UK defined contribution pension providers. Collectively, they manage more than £500bn in assets and have more than 15m active members.

Aviva was ranked no 1 with an overall score of 5.4 out of 10. Its stewardship instruments were rated 'good' while other metrics – such as Aviva’s commitment to measure to 1.5 °C, measurement and disclosure and its approach to climate solutions – were considered 'adequate'. However, other areas such as the firm’s detailed target setting, fossil fuels financing, and deforestation and land use were described as 'inadequate'.

According to the report, three providers – Aviva, Legal & General and DC master trust Nest – have ‘adequate’ climate plans in place. 

Several household names have ‘inadequate’ climate plans in place, MMMM argued. 

On both fossil fuel financing and deforestation and land use, all firms were found to be 'inadequate' or 'poor'. 

The areas providers score highest on include commitments to 1.5°C, measurement and disclosure, stewardship instruments and their approach to investments in climate solutions. 

MMMM said across the board, results are ‘worrying’, and run counter to public claims of climate leadership: “While this ranking shows most have set broad climate targets, the majority are failing in the substance, detail, and implementation of these plans.”

On average, providers scored just 3.2 out of 10. The campaign group stressed that the majority are failing to implement ambitious, science-based climate plans. 

Tony Burdon, chief executive of Make My Money Matter, said: “While there are pockets of progress which indicate what funds could achieve if they showed energy and ambition, overall leadership is scarce and progress slow. That’s why we now need all pension providers to recognise the findings of this report and invest in the skills and capacity needed to meet the climate crisis.”  

The research and analysis for this project were conducted between September and December 2023 and were based on publicly disclosed information as of 31 October 2023.

How are insurers responding to the analysis?

A spokesperson for Aegon UK said more work and focus will be needed across the UK pensions industry to tackle climate risk and this will require continued collaboration with industry peers, policymakers and experts to accelerate the transition to a sustainable future. 

“As one of the UK’s largest asset owners, we have a responsibility to understand and manage the impact of climate change on our business and, more importantly, our customers. We’re driving forward with our long-term strategy, acknowledging the journey ahead while celebrating significant strides, such as our target of net-zero greenhouse gases for our default funds by 2050, and halving emissions by 2030 relative to 2019 levels.”

The insurer said since 2020 it had educed its carbon footprint in its workplace default funds by 23%. Aegon UK is also a signatory to the UK Stewardship Code, “reinforcing our commitment to responsible investing and addressing the key issue of climate change within our investment practices”.

Legal & General Investment Management, the asset management unit of L&G, welcomed the MMMM report, adding: “We are pleased with our ranking and believe we have made progress across each of the report’s criteria.”

The firm encourages companies to align with a low carbon economy through its Climate Impact Pledge, which covers over 5,000 companies across 20 ‘climate critical’ sectors, with more than 100 companies targeted for direct engagement on accelerating the energy transition. 

LGIM published its deforestation policy in 2022, which outlines the firm’s approach to identifying potential exposure to deforestation and engaging with companies.

LGIM concluded: “There is still much more to do. We look forward to continuing our dialogue with Make My Money Matter as we work to deliver on the purpose and ambition represented in this report.”

Also welcoming the report, Gail Izat, managing director workplace at Standard Life, stressed that as an asset owner, it has set a target to reach net zero by 2050 and to achieve a 50% reduction in carbon emissions by 2030.

“We have been transparent about our strategy and progress, in our net zero transition plan, in order to ensure a managed and sensible approach, and we are proud of the progress we’ve made so far to deliver on our sustainability plans,” she said.

Commenting on deforestation and fossil fuels – the areas emphasised by the campaigners, Izat said the insurer published its first net zero transition plan last year, setting out a range of actions being undertaken. These include transitioning 1.5m members and £15bn of assets to sustainable solutions, establishing an inhouse stewardship team to engage with companies and using exclusion policy to limit investments in particular sectors including tobacco, nuclear weapons, controversial oil and gas and thermal coal. 

“In addition, we are using our voice to drive wider system change needed to achieve net zero,” she added.

“We continue to actively engage with government, regulators and industry climate change initiatives and have committed to a number of global initiatives and working groups while publishing detailed commitments and measures, and like our peers across the industry, we know there is more to do.” 

 

mallowstreet has contacted the remaining insurers included in the analysis – Aviva, Fidelity International, Prudential, Royal London and Scottish Widows – for comment. 

MMMM said all the firms were given the opportunity to respond to draft assessments. The campaign group told mallowstreet that overall, there has not been any significant challenge or disagreement with the assessment.

MMMM’s analysis can be found here.

For more detailed information on how each provider is scored, click here.