Shipra Gupta: ‘Pensions one of the most powerful tools to make net zero progress’

Driving pension funds towards more sustainable investment choices and 'greening' retirement schemes would give Britain's net zero efforts an enormous boost.

In fact, greening pensions will reduce carbon footprint more than stopping flying altogether.

At least, that is the stern message from Shipra Gupta, responsible investment lead at British pension giant Scottish Widows.

"Pensions are one of the most powerful tools at our disposal to make real progress towards net zero," Gupta argued, as she discussed new research by her firm which showed that switching to a green pension can save emissions equal to 11 return flights to New York per year.

"By embracing responsible investment approaches for our retirement savings, we each have a tangible means to decrease our individual carbon footprint and collectively combat climate change," she said.

Gupta is hopeful the pension sector is moving in the right direction.

"Understanding of the climate crisis has changed dramatically over the last few years, with countries and organisations being bolder in their net zero targets."

Gupta argued pension funds' members could become more critical and vocal, as she said two thirds of members do not know how to switch to responsibly invested pension funds.

The Scottish Widows data found that, if this information gap were to be addressed by the government, industry, and employers, UK consumers could collectively save up to 386 million tonnes of carbon emissions annually through their pensions.

Therefore, Gupta did stress there is "a critical need for heightened awareness and action regarding the role of green pensions in mitigating carbon emissions."

She explained that Scottish Widows, which looks after nearly £166.4bn of savings for more than six million customers in the UK, uses its Responsible Investment Framework to integrate ESG in the fund choices it makes available, "while also challenging the companies it invests in to behave more sustainably through our Stewardship activities."

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Nature investments

One key priority for Scottish Widows, currently, is nature investments, as the firm recently called on the UK government to become the first to mandate economy-wide Taskforce on Nature-related Financial Disclosures (TNFD) reporting requirements.

The emphasis on disclosures essentially stems from the old adage: if you can’t measure it, you can’t manage it.

Gupta argued that businesses and investors must go beyond simply managing and mitigating risk.

They should create positive impact by halting and reversing biodiversity loss, in line with the Kunming-Montreal Global Biodiversity Framework, she recently told Net Zero Investor.

"Making such investments now rather than later creates a first-mover advantage, potentially translating as more favourable terms for investments, gaining market share and reputational benefits, and emerging strongly on the various metrics being developed to help investors measure the impact of their portfolios on biodiversity."

She added: "A first-mover advantage potentially translates as more favourable terms for investments, gaining market share and reputational benefits."

Despite internal challenges, many funds and providers have begun to look at biodiversity in earnest, Gupta pointed out.

"Some approaches include focusing on sub-themes like deforestation/land use change, which serve as proxies for biodiversity loss," she said.

"Another is identifying hotpots in portfolios: investments where high dependencies on ecosystem services put value generation at risk."

There is also investment in nature-related thematic funds and nature-related engagement with investee companies and policymakers, Gupta stressed.

"Engaging with investee companies on their related policies and practices continues to be an important lever for pension funds when managing nature-related investment risk," she concluded.

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