Defined benefit (DB) trustees who are at the buyout stage and considering using insurers’ net-zero targets to help them choose a partner should focus on a firm’s performance in meeting interim emissions targets, Hymans Robertson has argued.

The firm’s risk transfer environmental, social and governance (ESG) annual report was designed to give trustees the insight they need to compare how firms perform against their emission targets.

In particular, it looks at insurers’ scope one and two emissions data, which Hymans said are more readily available, allowing trustees to compare them like for like.

The report found that many insurers aim for carbon neutrality on their investments by 2050 or earlier, and all have set interim targets.

Given this, Hymans Robertson said a focus on interim emissions enables trustees to better differentiate between firms and reduce the risk of choosing a partner that leaves them at risk of failing to meet their fiduciary duties.

Hymans Robertson head of ESG for risk transfer, Paul Hewitson, commented: “Most if not all insurers in the pensions bulk annuity market have set ambitious goals to be carbon neutral by 2050, not only in their operations but also in their investment portfolios.

“With the bulk annuity market continuing to grow – nearly £50bn of assets were transferred to insurers in 2023 – insurers are rightly looking to show that they’re actively managing the impact of the climate crisis on their business.”

“Trustees now also have more sustainability information available to them which is a good thing.

However, he argued that it was “important” that care was taken to get the most out of it.

“Our report focuses on scope one and two data because that is more readily available compared to scope three, for example,” he said.

“This allows for like-for-like comparison in the short term, although all insurers will need to include scope three emissions data for their long-term net zero position.

“In addition, focusing on progress against interim targets provides trustees with a better indicator of whether a firm will achieve their longer-term goals and then be able to fulfil their obligations to members.”

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