Shocking Revelation: Find Out Why UK Pension Scheme Abandoned Their ‘Net Zero’ Promise!

Greetings from New York, where I have just arrived ahead of the Moral Money Summit Americas which will be held on Tuesday and Wednesday next week. Join us for two days of riveting debate with a stellar cast of speakers including former Colombian President Iván Duque Marquez, former US Vice President Al Gore, and SEC Commissioner Hester Peirce. You can register to participate, either in person or online, Here.

Also, don’t miss the latest news in Sarah Murray’s Moral Money Forum series of authoritative and in-depth reports, this time on the drive for sustainability within the controversial private equity sector. Sarah will address risks and impacts on biodiversity in her next report and she is keen to hear from Moral Money readers as part of her research. Please take a minute to share your thoughts through our reader survey.

In today’s edition, Kenza reports on how carbon insetting could take hold in the UK pensions sector (following up on Patrick’s article recent piece on that topic). And I’ve written about the long to-do list facing Sherry Madera, the new head of the Carbon Disclosure Project. Thanks for reading. —Simon Mundy

Pension fund abandons ‘net zero’ claim.

Back when carbon credits were still in vogue in 2021, it seemed cutting edge for British pension scheme Cushon to offer a “net zero” version of a fund, claiming that investments had a net neutral impact on the climate.

Moral Money has since wondered whether this type of label would spread across the financial sector, given its obvious appeal to pensioners and savers concerned about their impact on the planet.

However, appetite for products claiming to have a “net zero” or “neutral” environmental impact appears to have been seriously dented by questions about whether carbon credit projects are achieving the claimed impact. Nature-based projects based on forestry projects have received particular attention.

Last month, the UK consultancy Carbon Trust he stopped offering verifies “carbon neutral”, while the EU has said it plans to ban companies from using carbon credits to publicly claim to be “climate neutral”.

Demonstrating the financial sector’s changing mood towards this issue, Cushon told Moral Money that from today he will no longer offer new customers the “net zero” option. This means abandoning a key part of its previous marketing strategy, after calling itself “the world’s first carbon-neutral pension”.

The pension fund will instead focus on achieving an 80% cut in holdings-related emissions in its sustainable strategy, as a percentage of total holdings and relative to the wider economy.

This target covers $400 million of funds managed by Cushon and could soon include up to $1.6 billion more, depending on trustee approval.

Cushon’s “net zero” call for the past two years has been based on the purchase of carbon credits, which represent a ton of carbon dioxide emissions avoided, reduced or captured. Then, as now, no company appears to have succeeded in reaching net zero by reducing original sources of emissions, such as its supply chain or product use.

“It’s not possible to build a diversified portfolio without emissions at the moment, it’s not possible,” Cushon strategy consultant Julius Pursaill told me last year. Buying offsets meant the strategy could reach net zero while remaining reasonably diversified, given the limited number of companies that emit very little, he said.

This week, however, he told me that the issue of compensation had become an unwanted distraction. “We realized that the vast majority of attention from outside commentators and investment advisors was on our compensation strategy, on the type we were buying, on verifying the calculations. . . what was happening within the investment strategy was not receiving any attention.”

The new priority is to change the portfolio annually to prioritize the lowest emitters and those reducing emissions the fastest. The Cushon Master Trust still aims to invest around 5% of assets in natural solutions, including carbon credits – subject to trustee approval – so it does not completely repudiate the idea.

The focus on decarbonising more than half of the strategy by 2030 is intended to shift the Overton window of politically acceptable ideas, just as the “net zero” narrative had previously done, Pursaill said. Companies around the world have set goals to halve emissions by 2030 and reach “net zero” by 2050.

One thing, however, has not changed in Cushon’s approach: the pension fund does not yet include indirect emissions from investee companies, known as scope 3, in setting objectives, due to concerns about the quality of data disclosed by companies. This is also the case for fossil fuel companies in its funds, whose indirect emissions account for much of their climate impact (for example, emissions from an oil company’s gasoline when used in cars).

Pietro Rocco, head of green finance at the Carbon Trust, told Moral Money that pension funds globally “would not have a material impact on decarbonisation” if they did not include Scope 3 emissions, which make up the majority of carbon footprint of investee companies globally. . “We always say that a [imperfectly calculated] a footprint is better than no footprint.”

He added that the Carbon Trust expects more financial institutions to abandon terms such as “net zero” and “carbon neutral” unless these terms are independently verified, due to increasingly “critical” consumers and the “rigorous” regulation. (Kenza Bryan)

A tray full of commitments for the new head of the CDP

The non-profit Carbon Disclosure Project has been an early promoter of the intersection between business and climate change: it has been helping companies report their carbon emissions since 2001 (two years before Greta Thunberg was born, to put the things in perspective).

Today it is a unique resource, with a database that collects and makes available the carbon emissions reports of over 23,000 companies around the world. But at a time when data sources and standards proliferate, can this venerable institution remain at the center of the corporate sustainability agenda?

That’s the task facing Sherry Madera, who this month took over as CEO of CDP, replacing Paul Simpson, a member of the founding team who had led the initiative for the past 12 years.

Madera, who previously worked as a public policy executive at Mastercard and as a UK trade official focused on China, told me that software will be a central focus. Many Moral Money readers will have experience disclosing or accessing data via the CDP platform. Madera has promised a complete overhaul of the system to be completed next year. The changes will make the system easier to use for regulators and other data seekers. Importantly, it will also seek to ease the reporting burden, particularly for smaller companies.

According to new CDP data released today, there has been a 24% year-over-year increase in companies using its platform to disclose carbon emissions. The expansion has been particularly strong in the Asia-Pacific region, Madera noted, as Asian companies close the gap with the United States and Europe. 86% of S&P 500 companies already report via CDP and 94% of the UK’s FTSE 100.

Listed companies worth $67 billion now report using CDP, the body says, equivalent to two-thirds of global market capitalisation. Adoption has been lower among private companies, which have not faced the same pressure for climate disclosure as their publicly traded counterparts. But Madera said he expects that to change, as they are under pressure for transparency from corporate clients.

CDP is also working to set up its reporting system according to the new standards of the International Sustainability Standards Board and the recommendations of the Task Force on Nature-Related Financial Disclosures. Amid this flurry of reporting-related activity, I’ve noticed, some have expressed concern that the emphasis on disclosure could distract from the push for substantive climate action.

“I think that’s where goals come in,” Madera responded. “Once you make a database public, you need to understand where you’re trying to go, measure it and manage it on an annual basis, perhaps even more frequently. . This is where disclosure integrates perfectly with real action.” (Simon Mundy)

Intelligent reading

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