The investment strategy Now Pensions implemented in Q1 2024 has enabled the master trust to be “on track” to achieve net zero by 2050 and a 50 per cent reduction by 2030, based on 2019 levels, it has revealed.

The provider’s narrative-based scenario analysis, as outlined in its Task Force on Climate-Related Financial Disclosures report, warned that a 3°C or higher warming scenario would be “catastrophic” for most investment portfolios as the “systematic economic consequences would likely be dire”.

Given this, Now Pensions said it has strengthened its commitment by stewarding its company holdings in a way that will contribute to limiting the warming to 1.5 - 2°C by 2050. 

In addition to this, the firm said that the decision to have its global equity investments managed by the scheme’s in-house investment manager, Cardano Risk Management Limited, allows them to have direct engagement and influence on its company holdings, supporting these companies in their net-zero transitions or if there was no credible transition plan, choose to disinvest.

In total, around 60 per cent of the firm’s Diversified Growth Fund was invested in an equity strategy to support the transition, while around 11 per cent was in sustainable and green bonds and around 4 per cent was in a corporate credit strategy.

All (100 per cent) of its physical global equity company holdings and 76 per cent of total holdings are now directly linked to the trustee’s responsible investment objectives.

In addition to this, the new strategy allowed the scheme to increase the level of investments within its portfolio that have targets in place approved by the Science Based Targets initiative (SBTi).

Under this strategy, 43 per cent of the global equity company investments have an SBTi-approved target, representing over 30 per cent of the overall portfolio.

Now Pensions also reported there had been “good” progress on reduction of the carbon emissions intensity of its portfolio in line with the pathway to net-zero by 2050 set out.

The carbon footprint was 52.0 tons of greenhouse gas per £1m invested for scope one and two in 2024, down from 63.1 tons in 2023.

For scope three emissions, 390.8 tons were recorded, down from 524.3 tons of carbon dioxide equivalent in 2023.

The firm said the metrics measure the emissions intensity of its corporate exposures which has declined due to the change in investment strategy.

The investment strategy changes have resulted in its holdings having a lower carbon impact.

Now Pensions director of investment, Martyn James, said: “Earlier this year we took the decision to implement a new investment strategy to our portfolio.

“This was set, not only with the ambition of improving performance and value for money for our members, but to also comprehensively improve our sustainable approach to investment.

“This new approach is strongly linked to our conviction and the principles of our trustees, to deliver a scheme that puts sustainability at the heart of its investment approach.”

James said that Now Pensions were “proud” of the progress made in this past year, with the number of its investments backed by a recognised SBTi increasing, while the carbon emissions per million invested has significantly decreased.

He acknowledged that these developments had put Now Pensions "well on its way" to achieving the objectives of a 50 per cent reduction in carbon emissions by 2030, based on 2019 levels.

Adding to this, Now Pensions head of sustainability, Keith Guthrie, said: “As our strategy becomes more imbedded, alongside our ability to play a more active role in our stewardship and influence with the companies we invest in, we believe we can move closer to achieving real world decarbonisation as a result of companies reducing their emissions.

“While we would like to see the world decarbonise even more quickly than the 2050 target, the reality is that global emissions have yet to peak, let alone decrease in-line with the pathway we have set out.

“As a result, an important part of Now Pensions strategy is to remain invested and engage with those high emitters of today whom we believe can develop credible plans to achieve net-zero by 2050. With its new investment strategy, we are able to do that.”

“The trustee expects the combination of stewardship and our investment framework to deliver good outcomes for our members, while contributing to the transition to a more sustainable economy, environment, and society,” Now Pensions chair of the trustee board, Joanne Segars, said.

“It's great to see that we're on track.”

---