The pursuit of reaching net-zero carbon emissions is the top reason for pension investment in renewable energy, according to research by AlphaReal.

When asking UK pension schemes and insurers to select the three main environmental, social and governance (ESG) drivers for investing in renewable energy, almost three-quarters (72 per cent) included ‘measurable targets and benefits including achieving net-zero carbon emissions by 2050’ in their top three.

Climate risk mitigation was the second biggest ESG driver for pension schemes and insurers, chosen by 71 per cent of survey respondents, while nearly two-thirds (65 per cent) cited energy security, job creation and economic growth.

More than half (57 per cent) said that investing in renewable energy helped them comply with environmental conventions and regulatory frameworks, and more than a third (35 per cent) stated that the asset class aligned with their ESG investment values.

Almost all (93 per cent) of those surveyed had declared a net-zero target, while 7 per cent were yet to do so.

When asked when they were likely to hit their net-zero targets, half (50 per cent) said within the next five years, 44 per cent expected to hit their target within five to 10 years, 3 per cent said it would take 10 to 20 years, and 3 per cent had already reached their goal.

“It is extremely encouraging that so many pension funds and insurers have announced a net-zero target, and that ESG investments are being selected with regard to measurable targets and benefits,” commented AlphaReal senior ESG associate, Maria Vaggione.

“Investors clearly recognise that renewable energy is an excellent way to align with net-zero targets and to contribute to the green transition.”

AlphaReal investment director, renewable infrastructure, Raza Ali, added: “UK pension funds and insurers are well on course to meet their net-zero carbon emissions goals by 2050 and the role of renewable energy investment is paramount to them getting across the line.”

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