Welcome to Spotlight

2. Does sustainability come at the expense of investment returns?

The Trustee Board’s sole responsibility is ensuring the Scheme has the money to pay members’ pensions. Key to this responsibility is risk management and, to reduce the risks posed to the Scheme by climate change, in 2020, the Trustee Board set a 2035 net zero goal. We recognise that climate change could have a material impact on our investments, both due to physical risks to the investments we own and because of risks from the global transition to a low-carbon economy. Managing these risks effectively gives us more certainty of delivering the outcomes we want. There are also significant investment opportunities created by this low-carbon transition that the Scheme can benefit from.

3. What are the biggest challenges to achieving your net zero goal?

The world has changed a lot since we set our goal in 2020 of achieving net zero by 2035: a global pandemic, the war in Ukraine and now inflation. We know that the journey to net zero won’t be straightforward, for us or the wider economy. We’ll need to be pragmatic in our approach, and learn and adapt as we go, so we can continue to deliver on both our climate and financial targets.

4. What’s your approach to divestment?

We could simply sell the investments with the highest emissions. But the reality is that they could well end up in the hands of less engaged owners and that wouldn’t bring about any real-world decarbonisation.

We believe that we will achieve better investment outcomes by engaging with companies to persuade them to put in place credible transition plans and deliver on them.

But there will be a set time period to put those plans in place and reach set milestones – and we would expect to divest from companies or sectors that are not making the transition quickly enough.