The Universities Superannuation Scheme (USS), the UK's largest pension scheme by assets, has announced its commitment to reach net-zero for greenhouse gasses by 2050.

As part of this, USS Investment Management will develop a comprehensive strategy to deliver on this ambition while also remaining mindful of the scheme's fiduciary duties.

The transition will not rely on buying carbon offsets, and will instead require a fresh focus by its internal investment teams in terms of where and how it divests, as well as collaboration with peer funds, external asset manages and others in the investment value chain.

Actions expected to be included in the short-, medium- and long-term targets currently being developed include working with internal investment teams to ensure processes are in place to select those companies, which assets to own, and which assets to divest from.

The scheme is also expected to review and possibly change the benchmarks used to guide and measure performance to ensure that these take carbon into account, as well as ensuring that assets own directly are resilient in the face of a move to a net-zero world.

The USS will continue building on the £1bn already invested into developing a portfolio of low-carbon investments, such as renewable energy, whilst also divesting over time from high-carbon sectors which are at risk from the transition, as it has previously done with thermal coal.

In addition to this, the scheme emphasised that, as a universal owner, it is exposed to the economic performance of global markets, arguing that it is therefore “critical” to engage with policy makers and advocate for clear climate policies which will lead to a smooth transition.

USS group CEO, Bill Galvin, commented: “As a trustee we must act in the best financial interests of our members and the scheme and that requires us to consider all material risks to investment performance.

“It is quite clear that environmental, social and governance (ESG), and in particular, climate change, have become more important than ever in how we consider investment returns.

“Today’s announcement is in recognition of the seriousness with which the trustee is treating ESG risks and also acts as a signal to the market, our assets and to policymakers that USS is willing to play its part in the important move to decarbonise by 2050.”

UK Energy Minister, Anna-Marie Trevelyan, added: “Pension funds and their members have a critical role to play in fighting climate change and the USS’s new target to reach net-zero by 2050, if not before, will see it take a leading role as a responsible investor.

“I hope USS’s step today will encourage other investment groups to follow suit in using their position to shape the green economy, provide climate security for generations to come, and play their part in helping the UK end its contribution to climate change by 2050.”

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