Nest, the £20bn UK government-backed workplace pension scheme, has sold its holdings in ExxonMobil and four other energy companies after criticising their progress on managing climate change risks.
The group, which looks after the retirement savings of 10m UK workers, has dumped investments worth £40m in Exxon, Imperial Oil and Korea Electric Power Corp (Kepco), Marathon Oil and Power Assets are all part of the Hong Kong-based electric utility company.
Frustration at the response of some fossil fuel company to the threat of catastrophic global climate change is driving a small but increasing number of influential pension fund to divest businesses that are seen as hindering progress towards a low carbon economy.
“These five companies have not done enough to convince us that we should remain shareholders,” said Katharina Lindmeier, a senior responsible investment manager at Nest. “They will not return to our portfolio until they demonstrate clear progress in preparing for a low-carbon economy.”
The pension scheme had held the five companies in a £9bn climate aware fund run by UBS. The Swiss bank decided to apply the same exclusions to its suite of climate aware tracker funds that hold assets of approximately $20.8bn as well as its actively managed equity sustainability funds and fixed income sustainability funds.
Francis Condon from UBS Asset Management is the head of thematic collaboration and engagement. He said that the decision was made to sell after three years’ of discussions with 49 companies that had been identified as climate change laggards.
“Our three-year engagement programme provided the companies with time to understand our concerns and act on them,” he said. “However, where we have not seen tangible progress, we are taking action.”
UBS declined to reveal the value of the shares that it sold, but this marks the first time UBS’s asset management arm has withdrawn from energy companies in response to climate change risks.
Large institutional investors are opposed to this. DevestmentBecause they prefer to use persuasion and their voting power as shareholders in order to influence the behavior of companies.
But some of the world’s largest pension funds have They have resolutely defended their positionon climate change risks, and opted to divest companies that rely upon fossil fuels to make profit.
ABP of the Netherlands declared in October that it would Sell all of its holdings in fossil fuel companies worth more than €15bn.
The third-largest US pension funds, the New York State Common Retirement Fund was pledged last January to sell out energy companies that don’t have a plan for reducing emissions and moving away from fossil fuels.
Nest has set a new, ambitious target for carbon reduction as part of its goal to reach net zero emissions in 2050. It has committed to a 30% reduction in carbon footprint for its portfolio of publicly traded bonds and stocks by 2025. These two asset classes are expected to make up to 75 per cent of Nest’s entire investment portfolio in 2025.
“We want to be on the front foot on climate change to achieve better risk-adjusted returns for our members,” said Lindmeier. “The new climate target demonstrates that Nest is not hanging around.”