Nest, the workplace pension scheme, will take another step in reducing its carbon footprint while increasing investment in emerging market equities.

The pension scheme plans to nearly double its investment in emerging markets, from around £480m as of September 2020 to an estimated £930m by February 2021. However, the new strategy will also be in line with Nest’s Climate Change strategy, aligning the scheme with being net-zero by 2050 or sooner and expecting to halve emissions by 2030. As such investments will address a range of environmental, social and governance risks, tracking a customised index produced in collaboration with Northern Trust Asset Management. It will tilt investment in companies based on a score calculated on three key components: energy efficiency, alternative energy, and green building.

This ‘energy tilt’ in the fund means Nest will reduce investment in companies with large oil or gas reserves and those with a high carbon intensity, while increasing investment in clean technology and renewable energy opportunities.

This move will take Nest’s investments in dedicated climate-aware strategies to nearly £8bn, representing half (51 per cent) of the scheme’s overall portfolio as of February 2021.

Commenting on the announcement Diandra Soobiah, Nest’s head of responsible investment, believes Nest is getting ahead of the game by seeking out a new, innovative way to gain more access to developing markets: “Over the next 10-20 years countries like China and India are expected to see huge increases in urbanisation. It’s crucial that investors in such a strategy are active stewards for companies in emerging markets. We’ll encourage companies to prepare for the low carbon transition to ensure they remain attractive investments for our members.”

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