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BT Pension Scheme sets 2035 net zero goal for its entire £55bn portfolio

  • Over the next fifteen years, the majority of the Scheme’s assets will be reinvested creating a unique opportunity to invest in companies that have lower emissions and increase investment in transition solutions*.
  • BTPS Chair Otto Thoresen said: “Climate change poses a clear and present threat to the Scheme’s ability to meet its long-term commitments. Setting a net zero goal of 2035 is ambitious but, it’s important to take steps now to safeguard the future of the portfolio and the planet.”
  • Over time, all investment mandates will be aligned with the net zero goal. The Scheme will select and retain managers that it believes can achieve these guidelines and will require managers to report against a net zero climate scorecard.
  • Managers will engage with investments to set net zero emissions objectives, however insufficient efforts to curb emissions after a period of engagement may result in divestment. 

BT Pension Scheme, (“BTPS” or “the Scheme”) the UK’s largest company pension scheme, has today committed to an ambitious new goal to achieve net zero** greenhouse gas emissions (absolute scope 1-3)*** by 2035 across its £55 billion portfolio.

The goal has been set to limit the risk that climate change poses to the Scheme meeting its long-term commitments and will involve both reducing emissions from the Scheme’s portfolio and investing in assets that will support the transition towards a low carbon economy.

BTPS sponsor, BT Group plc, has been a corporate leader on climate change for over 25 years. It was among the first companies to adopt science-based targets on emissions reduction and in 2018 set a net zero target of its own by 2045. Last month, BT Group ranked second in EcoAct’s annual sustainability ratings of the FTSE 100, DOW 30, IBEX 35 and CAC 40.

BTPS surveyed its members**** (comprising current and former employees of BT Group) in February 2020 regarding attitudes to responsible investment. 74% of members said they expect the Scheme to continue taking into consideration the environmental and social impact of the investments it makes. 65% said they expect BTPS to use its investments to make a positive impact on the environment and society.

The new climate change policy aligns BTPS with the Paris Agreement goals to keep global temperature rises within 1.5°C above pre-industrial levels by 2050.

Otto Thoresen, Chair, BTPS said:
“Climate change poses a clear and present threat to the Scheme’s ability to meet its long-term commitments.

“Continued increases in global warming will amplify existing risks and create new risks with potentially irreversible and catastrophic impacts on markets, society and the environment.

“Setting a net zero goal of 2035 is ambitious but we believe the time to act is now and we hope that others will join us in setting their own net zero goals.”

The net zero policy will build on BTPS’s progress in this area where its listed equity portfolio and its corporate bond portfolio are respectively 40% and 60% less carbon intense than for comparable indices. 

Morten Nilsson, CEO, BTPS Management said:
“As the global economy looks for ways to recover from the impact of the pandemic, we have an opportunity to do things differently. Over the next 15 years, the Scheme will be re-investing the majority of its assets and, as we look to deliver the best returns, we must not waste this opportunity to support a cleaner and greener future. 

“Asset owners are uniquely placed to use their influence to drive decarbonisation and influence who has access to capital by setting targets to tackle climate change. But we cannot achieve this goal alone.

“Data on emissions needs to improve and companies, governments and consumers must act. Standing by and doing nothing is no longer an option.”

Minister for Pensions and Financial Inclusion, Guy Opperman, said:
"The UK was the first G7 country to legislate for net zero and I warmly welcome the BT Pension Scheme’s commitment to achieving their own net zero target by 2035. This is an encouraging sign of how government, industry and investors can work collaboratively to build an appropriate regulatory framework and promote sustainable investment opportunities as we build back better, and greener.”

To achieve its goal, BTPS will focus on four areas:

1. Portfolio Construction
Over the next 15 years, there will be a major change in the investments held by BTPS. By 2035, almost all the Scheme’s members will be retired. As a result, the Scheme’s investment strategy will need more investments focused on safe, predictable income such as bonds and secure income assets to meet its members’ monthly pension payments. This creates a unique opportunity, without incurring additional transaction costs, to make investments in companies that have lower emissions and increase investment in transition solutions.

2. Mandate design and manager selection
BTPS will align new and existing mandate objectives with the Scheme’s net zero goal. BTPS will select and retain managers that it believes can deliver the investment performance required and achieve its climate change targets and will require managers to report against a net zero climate scorecard. The scorecard will be assessed annually to review managers’ performance and, if necessary, manager changes will be made. 

3. Stewardship
The Scheme will implement a revised voting policy reflecting its net zero objectives. All underlying investments will be required to make appropriate emission disclosures and clear plans for reducing their emissions to net zero. Failure to engage or make sufficient efforts to curb emissions after a period of engagement is likely to result in divestment.

4. Advocacy
The Scheme will use its influence and join others in advocating for action to achieve net zero aligned policy from policymakers, regulators, governments, the investment industry and other stakeholders. The Scheme will use its voice to encourage the creation of government funding programmes to mobilise investments in clean and resilient growth. BTPS also recognises the importance of accurate and timely data in achieving its goals and will work with index and data providers, ratings agencies, and consultants to urgently improve climate change data and disclosures.

To further underline its commitment, BTPS joins the Net Zero Asset Owner Alliance to work with peers in playing a key role in helping the world deliver a 1.5°C target. It also becomes a public supporter of the Transition Pathways Initiative (TPI), which assesses companies’ preparedness for the transition to a low-carbon economy, supporting efforts to address climate change.

– Ends –

For further information:

BTPSM
Amy Mankelow, Head of Communications & External Relations
+44 (0)20 3978 5014
+44 (0)7941 105879
a.mankelow@btps.co.uk

Montfort
Olly Scott
+44 (0)781234 5205
scott@montfort.london 

Notes to editors
*Transition investments and solutions: Financial products, services and investments that support companies, sovereigns and individuals to align with the goals laid out in the Paris Agreement. Examples include investments that provide low carbon solutions or help sequester carbon out of the atmosphere.

 **Net Zero: Achieving net zero emissions (absolute scope 1-3) in the investment value chain and investing in transition solutions to reduce or remove carbon emissions from the atmosphere.

 *** Scope 1-3 emissions: The Greenhouse Gas Protocol, an international accounting tool, categorises GHG emissions into ‘scopes’. Scope 1 covers direct emissions from the reporting company’s owned or controlled sources. Scope 2 covers indirect emissions from purchased electricity, steam energy, heating and cooling that have been consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in the reporting company’s value chain.
www.ghgprotocol.org  

**** 8,500 members responded to the online survey.

  • 74% of members expect BTPS to continue taking into consideration the environmental and social impact of the investments it makes.
  • 65% expect BTPS to use its investments to make a positive impact on the environment and society.
  • 62% of members expect BTPS to actively avoid investments that have a materially negative impact on the environment and society.
  • 48% expect BTPS to prioritise performance over the environmental and social impact of our investments

About BTPS 
The BT Pension Scheme (BTPS) is the largest private-sector pension scheme in the UK. It has c.300,000 members and c.£55bn of assets and pays out over £2.5bn in pension and other benefits every year. 

A defined benefit pension scheme for employees, former employees and dependants of BT plc and some of its associated companies, the Scheme closed to new members in 2001 and to future accrual in 2018. 

Established in 1984, BTPS has a long history as a responsible and engaged investor. As part of its responsible investment strategy, the Scheme fully integrates environmental, social and governance (ESG) factors into its investment process and promotes active stewardship of its portfolio companies and assets. 

About BTPSM
BTPSM is a wholly-owned subsidiary of the Scheme. It is a regulated entity and authorised by the Financial Conduct Authority (FCA). BTPSM is led by a board of directors that are authorised by the FCA. 

BTPSM is the primary service provider (fiduciary management services, member services, operational and secretariat services) to BTPS.

The BTPSM Executive board is responsible for reporting and providing assurance to the Trustee that the business is well managed and aligned to the Trustee’s objectives.

It also has the legal responsibility to ensure that it has adequate resources and governance arrangements to operate the business including the effective delivery and oversight of Scheme administration, operations, financial performance and the delivery and oversight of the implementation of the Scheme’s investment strategy.

The operational responsibilities and liabilities borne by BTPSM directors and senior management are distinct from the Trustee’s fiduciary responsibilities. Accordingly, the BTPSM board consists entirely of Executive directors.

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