Pension scheme trustees should not be relying on divestment to reach their net-zero targets industry experts have said, although views remain split around the “difficult dilemma” of carbon offsets.

Speaking at the PLSA Investment Conference 2022, Nest chief investment officer, Mark Fawcett, argued that pension schemes should not rely on divestment, instead stressing the need to engage with asset managers and owners to create change.

“It’s not primarily about divestment,” he said. “You can’t divest your way to net zero and it’s not in our members interests to do so because we need to keep applying pressure and working with other asset owners and asset managers to get companies to have a realistic net-zero transitional plans.”

Fawcett stated that Nest is also “a bit cautious” about the use of carbon offsets, emphasising that the scheme takes “a very sceptical and hard look when companies are relying on offsets or carbon capture”.

However, he clarified that whilst these technologies are “probably not the main answer”, they are “really important” and have to be developed.

Adding to this, London CIV CIO, Jason Fletcher, warned against raising concerns too early in the push for net zero, explaining that whilst there are challenges around accounting and measurements, “we need to forge ahead anyway”.

“The accounting will come along later, but accusations at this stage of greenwashing and not being fully audited, I think we do need to hold back and see how things go," he continued.

Fletcher agreed, however, that carbon offsets are a “difficult dilemma”, emphasising that whilst investors may set net-zero targets, there will always be a need to offset at least some carbon.

“We are at some point going to need to talk seriously about what we mean by carbon offsets and what we can do about them," he said.

Despite this, he warned that it remains a “really difficult dilemma”, highlighting the example of the push to rewilding, which, whilst good for the environment, could raise questions as to whether the land could have been used for other purposes, potentially creating more jobs, for instance.

"We need to balance these issues and make sure we get it right," he emphasised.

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