UBS Asset Management (AM) has divested from five energy companies that it identified as not making enough progress on climate risk following a three-year engagement programme.

The asset manager has excluded the companies across its Climate Aware funds, and its actively managed equity and fixed income sustainability funds.

The companies divested from were Exxon Mobil, Imperial Oil, Kepco, Marathon Oil and Power Assets.

Pension scheme Nest had £40m worth of investment in these companies through the Climate Aware fund, as of June 2021.

Nest stated that the firms will not return to its main portfolio until they demonstrate “clear progress” in preparing for the low-carbon economy.

UBS AM’s decision to divest from the companies came following a three-year engagement programme as part of its Climate Aware framework.

It had identified 49 gas and oil companies as lagging on climate change performance, with 60 per cent of these firms subsequently making ‘good or excellent’ progress in transitioning towards a lower-carbon economy.

“COP26 showed the need for immediate action,” commented Nest senior responsible investment manager, Katharina Lindmeier.

“The prospect of a 2.4C global temperature rise will cause dramatic changes to our ways of life and businesses need to be preparing now to remain profitable and successful.

“At Nest we aim to work with companies to encourage sustainable business decisions but will draw the line somewhere. The five companies being excluded have not done enough to convince us that we should remain shareholders.

“The new short-term climate target we’re announcing today should demonstrate not only our commitment on becoming net zero, but also that we’re not hanging around. We want to be on the front foot for such an important issue like climate change to achieve better risk-adjusted returns for our members.”

Alongside the divestment, Nest also announced a new carbon reduction target of decreasing carbon emissions in its public equity and fixed-income investments by 30 per cent by 2025, when compared to its 2019 portfolio.

UBS AM head of thematic engagement, Francis Condon, added: “We view engagement as fundamental to any sustainable investing approach. Through engagement, investors can be a force for good in influencing corporate behaviour and accelerating action in those sectors where it is most needed.

“Our three-year engagement programme provided companies with time to understand our concerns and act on them. We have seen positive progress from most companies in the program on their climate strategy and transition to a lower carbon economy. However, where we have not seen tangible progress, we are taking action.”

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