A new public policy positioning paper published today by the Edinburgh-based Global Ethical Finance Initiative (GEFI) warns that without decisive action from the finance sector, the actions needed to slow global warming will not be achieved.

The paper outlines the need for a ‘transition roadmap’ to net zero for pension providers to be developed in Scotland, which could then be used around the globe.

Scotland’s local government pension schemes serve more than 500,000 members, with the largest being the Lothian and Strathclyde schemes, with assets of more than £8 billion and £26bn respectively.

GEFI, which is running a ‘Path to COP26’ campaign, has convened six of the 11 local government pension providers in Scotland to discuss their climate action journey and the development of a ‘transition roadmap’.

The event launching the paper today (WED) also brings together over 300 senior finance leaders with presentations on the paper by GEFI and a discussion between industry experts David Hickey of the Lothian Pension Fund and Eva Cairns of Aberdeen Standard Investments.

The new policy paper identifies the key challenges for pension providers on their net-zero journey; accurate data on the climate impact of investments, lack of knowledge for pension fund trustees and staff and failure to commit to climate action.

The paper adds that pension providers should use the power of their investments to drive change in the companies they invest in.
This means active engagement with investee companies and voting out directors of major polluters with no transition plans.

It also states that divestment should not be the primary strategy as this just moves the problem elsewhere, whilst buying carbon offsets should be a ‘last resort’ to deal with greenhouse gas emissions – with decarbonisation being the primary focus.

However, the responsibility for net-zero cannot be left solely at the door of pension providers.

Every company, investors and the whole of society should be pushing for a net zero-carbon future.

The next step will be the development of the roadmap to assist pension providers in overcoming key challenges and start taking climate action now.

The roadmap will provide clear actions that pension providers can take on their net-zero journey.

Natalie Jackson, lead author of the Global Ethical Finance Initiative’s net-zero pensions report, said: “Without decisive action from the finance sector, the goals of the Paris Agreement will not be achieved - and we may have missed our last opportunity to address the existential threat of climate change.

“Our Net Zero Pension campaign uses the global focus on COP26 in Glasgow to drive the urgent action required now by local government pension schemes in Scotland and provide global leadership in taking action on climate change.

“GEFI’s transition roadmap will help pension funds to understand their current position as well as set achievable net-zero ambitions or deliver on net-zero ambitions already made.”