The Cushon Master Trust has ditched its net zero pension offer amid carbon offsetting concerns, instead setting its sight on reducing emissions from its main investment offer by 80 per cent by the end of the decade.
The UK pension fund had previously announced what it claimed was the “world’s first” net zero pension in 2021, in part based on the purchase of carbon credits to offset emissions in its pooled investment portfolio.
But amid growing concerns around the credibility of making ‘net zero’ and ‘carbon neutral’ based on the purchase of carbon credits over the past two years, Cushon has dropped such claims and opted to end the use of offsets for future clients altogether.
Instead, the master trust pension fund said it had now set an ambition to fully decarbonise its main default investment strategy “at pace”, as it yesterday announced a target to reduce its Scope 1 and 2 emissions by 80 per cent by September 2020, against a 2022 baseline.
The new ambition focuses on the growth phase of its main default strategy, which has to date achieved a 44 per cent reduction in its emissions, putting it “on track” to meet the 2030 target, Cushon said.
However, Cushon said that the remaining 20 per cent of emissions not covered in its new 2030 target were “not in the master trust’s control”, and that achieving a fully decarbonised investment strategy was not currently possible in a fossil-fuel reliant economy which “requires unambiguous policy intervention from government and industry collaboration to end that reliance”.
“This is another milestone in our mission to build a pensions landscape that not only provides better outcomes in retirement but also acts as a force for good in the world,” said Cushon Master Trust chair Roger Mattingly.
“With our transition plan in place to reduce emissions at pace, we’re proud to help lead the charge in the pensions industry towards net zero. However, individual providers can only do so much – at some stage the industry, government and other stakeholders will have to collaborate to remove the final portion of emissions. We need to start this conversation now if the industry as a whole is going to meet 2050 net zero targets.”
In an article for Professional Pensions yesterday, Mattingly wrote that “pretty much every company that pension funds in vest in are net emitters”, but that this “shouldn’t be an excuse for inaction”, adding that in any case green investment strategies were the more prudent, long-term approach to take with people’s savings.
“This is not a matter of eco ‘do-gooding’ but a wise investment strategy,” he wrote. “It may be the case that the worst emitters might be producing the best returns today, but in 30 years’ time this is unlikely to be the case. The need for greener investments is as much about ensuring returns as it is about ESG.”
As it stands, the new 2030 target covers around $400m of Cushon’s managed funds, and could soon include another $1.6bn if it secures trustee approval, according to the Financial Times. However, the newspaper reported that the pension fund would not be including Scope 3 emissions – which generally account for the lion’s share of a company’s carbon footprint – in its targets due to concerns about the quality and credibility of data disclosed by firms.
But Cushon strategic adviser Julius Pursaill said that by ramping up its emissions reduction target for 2030, the firm was “attempting to demonstrate what is possible”.
“Our target is supported by a transition plan, which demonstrates asset class by asset class, mandate by mandate, how we will achieve these reductions,” he said. “We believe Cushon’s transition plan demonstrates these reductions can be achieved without an unacceptable loss of diversification, and still leave room to support high emitting businesses in transition.”
A version of this article originally appeared at Professional Pensions.