The UK’s biggest pension fund, the National Employment Saving Trust, are to shun business involved with coal, tar sands or arctic drilling.

The National Employment Saving Trust, with around 9 million members, is to begin divesting from fossil fuels. This movement appears as a landmark move for the industry to climate campaigners.

The fund will ban investments in any companies involved in coal mining, oil from tar sands and arctic drilling. But the move puts the public corporation of the Department for Work  potentially at odds with the current pensions minister, Guy Opperman, who earlier this month condemned divestment as “counter productive”.

In addition the fund, which handles much of the pensions of workers saving under the government’s “auto enrolment” scheme, will shift £5.5bn into “climate aware” investments as it anticipates a green economic recovery from coronavirus.  Also, it will seek to reduce its carbon-intensive holdings, such as with the traditional oil giants, while investing more money in renewable energy infrastructure.

The ban will mean that some of the world’s biggest mining companies, such as BHP, can never be part of it’s share holdings, as long they derive profits from digging coal. It said it will sell its final holdings in BHP by 3 August.Mining industry's energy problem

The fund’s chief investment officer, Mark Fawcett, said Nest was sending a strong and clear message about the seriousness of climate change.

“Just like coronavirus, climate change poses serious risks to both our savers and their investments,” Fawcett said. “It has the potential to cause catastrophic damage and completely disrupt our way of life. No one wants to save throughout their life to retire into a world devastated by climate change.

“As the world’s economy slowly recovers from coronavirus, we want to ensure this recovery is a green one. We have a unique opportunity to support sustainable growth and transition towards a low-carbon economy.”

Other pension funds have gone further – in 2016 Waltham Forest’s local government pension scheme was the first to commit to full divestment – selling out of coal, tar sands and oil and gas, and last year Cardiff Councillors made a similar commitment.

The National Employment Saving Trust is hesitant about describing its new policy as a full divestment programme. It said it remained interested in oil companies that were transitioning from carbon-based fuels to green energy and renewable technology and that it would use its muscle to challenge them and push for stricter targets.

Campaigners welcomed the new climate policy and said it was likely to prompt better behaviour at other funds. Lauren Peacock of ShareAction said: “We hope it will encourage other pension schemes to up their ambition … Nest is setting clear expectations for those most responsible for the climate emergency and demonstrating the power of pensions to move them along a more sustainable path.”

Polling for the fund found that 65% of pension savers believed their pension should be invested in a way that reduced the impact of climate change. Just 4% strongly disagreed.

However, its decision to divest from the dirtiest polluters and reduce holdings elsewhere is in contrast to arguments set out by Opperman. The minister publicly called on pension trustees to keep hold of fossil fuel assets in order to “nudge, cajole or vote” polluting companies towards sustainable business practises. Opperman’s position provoked an open letter from more than 60 MPs, NGO bosses and faith leaders who criticised the minister’s “anti-divestment stance” and warned that urging companies to remain invested in polluting companies contradicted government guidance set in April this year.

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