BT Pension Scheme sets 2035 net zero goal for its entire £55bn portfolio

BT Pension Scheme, the UK’s largest company pension scheme, has today committed to an ambitious new goal to achieve net zero greenhouse gas emissions (absolute scope 1-3) by 2035 across its £55 billion portfolio.

The goal has been set to limit the risk that climate change poses to the Scheme meeting its long-term commitments and will involve both reducing emissions from the Scheme’s portfolio and investing in assets that will support the transition towards a low carbon economy.

BTPS sponsor, BT Group plc, has been a corporate leader on climate change for over 25 years. It was among the first companies to adopt science-based targets on emissions reduction and in 2018 set a net zero target of its own by 2045. Last month, BT Group ranked second in EcoAct’s annual sustainability ratings of the FTSE 100, DOW 30, IBEX 35 and CAC 40.

BTPS surveyed its members (comprising current and former employees of BT Group) in February 2020 regarding attitudes to responsible investment. 74% of members said they expect the Scheme to continue taking into consideration the environmental and social impact of the investments it makes. 65% said they expect BTPS to use its investments to make a positive impact on the environment and society.

The new climate change policy aligns BTPS with the Paris Agreement goals to keep global temperature rises within 1.5°C above pre-industrial levels by 2050.

Otto Thoresen, Chair, BTPS said:
“Climate change poses a clear and present threat to the Scheme’s ability to meet its long-term commitments.

“Continued increases in global warming will amplify existing risks and create new risks with potentially irreversible and catastrophic impacts on markets, society and the environment.

“Setting a net zero goal of 2035 is ambitious but we believe the time to act is now and we hope that others will join us in setting their own net zero goals.”

The net zero policy will build on BTPS’s progress in this area where its listed equity portfolio and its corporate bond portfolio are respectively 40% and 60% less carbon intense than for comparable indices. 

Morten Nilsson, CEO, BTPS Management said:
“As the global economy looks for ways to recover from the impact of the pandemic, we have an opportunity to do things differently. Over the next 15 years, the Scheme will be re-investing the majority of its assets and, as we look to deliver the best returns, we must not waste this opportunity to support a cleaner and greener future. 

“Asset owners are uniquely placed to use their influence to drive decarbonisation and influence who has access to capital by setting targets to tackle climate change. But we cannot achieve this goal alone.

“Data on emissions needs to improve and companies, governments and consumers must act. Standing by and doing nothing is no longer an option.”

Minister for Pensions and Financial Inclusion, Guy Opperman, said:
“The UK was the first G7 country to legislate for net zero and I warmly welcome the BT Pension Scheme’s commitment to achieving their own net zero target by 2035. This is an encouraging sign of how government, industry and investors can work collaboratively to build an appropriate regulatory framework and promote sustainable investment opportunities as we build back better, and greener.”

To achieve its goal, BTPS will focus on four areas:

1. Portfolio Construction
Over the next 15 years, there will be a major change in the investments held by BTPS. By 2035, almost all the Scheme’s members will be retired. As a result, the Scheme’s investment strategy will need more investments focused on safe, predictable income such as bonds and secure income assets to meet its members’ monthly pension payments. This creates a unique opportunity, without incurring additional transaction costs, to make investments in companies that have lower emissions and increase investment in transition solutions.

2. Mandate design and manager selection
BTPS will align new and existing mandate objectives with the Scheme’s net zero goal. BTPS will select and retain managers that it believes can deliver the investment performance required and achieve its climate change targets and will require managers to report against a net zero climate scorecard. The scorecard will be assessed annually to review managers’ performance and, if necessary, manager changes will be made. 

3. Stewardship
The Scheme will implement a revised voting policy reflecting its net zero objectives. All underlying investments will be required to make appropriate emission disclosures and clear plans for reducing their emissions to net zero. Failure to engage or make sufficient efforts to curb emissions after a period of engagement is likely to result in divestment.

4. Advocacy
The Scheme will use its influence and join others in advocating for action to achieve net zero aligned policy from policymakers, regulators, governments, the investment industry and other stakeholders. The Scheme will use its voice to encourage the creation of government funding programmes to mobilise investments in clean and resilient growth. BTPS also recognises the importance of accurate and timely data in achieving its goals and will work with index and data providers, ratings agencies, and consultants to urgently improve climate change data and disclosures.

To further underline its commitment, BTPS joins the Net Zero Asset Owner Alliance to work with peers in playing a key role in helping the world deliver a 1.5°C target. It also becomes a public supporter of the Transition Pathways Initiative (TPI), which assesses companies’ preparedness for the transition to a low-carbon economy, supporting efforts to address climate change.

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