What role do pension funds play in helping meet net zero emissions? How can big words become big actions – and what role to scheme members play in this? 

This weekend, reaching net zero was a popular topic not just at the G7 Summit but also the Pensions Forum ESG Summit, an international event organised by the World Pensions Forum on Friday to coincide with the G7. 

 

Government should put pressure on oil and gas industry – Altmann 

 

Baroness Ros Altmann, a peer and former pensions minister, touched on environmental, social and governance and how pension funds need to turn words into action. 

“ESG and net zero have become pretty popular buzz words,” she said. “But we need to make this happen in practice.” 

At the G7 Summit over the weekend, leaders said that they would aim to reach net zero by 2050 at the latest, with Germany and Canada joining the UK and the US in doubling their pledges.  

As climate change is having an impact on investments, pension schemes have the opportunity to be influential in this area. Some schemes in the UK have previously announced aims by 2050 or even 2030. 

Altmann said the industry needs to make green investments now: “We have an opportunity as we rebuild economies... to look at ways we can do that in a much more environmentally friendly fashion.” 

As oil and gas companies are one of the significant investments of many pension schemes, Altmann called for governments to “encourage and maybe help” these companies to use their resources to invest in alternative energies.  

“We have already seen a number of reports which suggest that the current profile of exploration and development is pretty out of sync with any realistic aim of getting to net zero anytime over the next 20-25 years,” noted Altmann. The head of the International Energy Agency said last month that oil and gas exploitation must stop this year and no new coal-fired power stations can be built if the world is to meet net zero by 2050. 

 

Members want impact 

 

Altmann stressed the importance of pension scheme members’ involvement in ESG and impact investment decisions. “I believe that members will increasingly want their money to be doing good, not just for themselves over the long run, but for perhaps the rest of society and the planet in the shorter term too,” she said. “Members are going to want to see the pension money that they are contributing... is being invested wisely.” 

Altmann argued that member input could be for the benefit of both members and schemes: “If they feel part of the decision and they understand what this is all about... I think they may well feel that this is worthwhile, rather than having to be forced to put money in because the government says so,” she said. 

Impact investing in particular may be positively received by scheme members. Altmann was in favour of using pension funds to support local aims: “Wouldn't it be great if we could use pension assets to help house and look after elderly people who need care?” 

 

Some look to Australia on infrastructure and other alternative investments, specifically on how they approach social housing. Nick Sherry, a former Australian politician, said there is a “massive underinvestment” in purpose-built disability housing. 

 

How much involvement do you think scheme members should have in ESG and impact investment decisions?