Why is your pension fund so obsessed with net zero?
Legal & General is Britain's largest asset manager, with over £1 trillion on its books. Every pound it manages should be dedicated to achieving the highest possible returns. This matters a lot: L&G manages over five million pensions in the UK.
But in recent years, the asset manager has been particularly concerned with fashionable causes, instead of being entirely focused on making sure your retirement is secure.
That is why I recently attended their AGM. I wanted to learn why the board is wedded to net zero, despite their fiduciary duty to clients, and whether they would consider reprioritising saver returns instead.
At the Q&A I highlighted that US competitors have dropped their net zero ambitions. Most have pulled out of the 'Net Zero Asset Owner Alliance' – a UN-led consortium of asset managers 'committed to decarbonising their investment portfolios and achieving net-zero emissions by 2050.'
L&G – along with most other British pension fund managers – is still a part of this alliance. But their commitment to decarbonising their portfolios and advocating for 'public policies, for a low-carbon transition' are premised on a net zero consensus that no longer exists.
At the moment, roughly half of the public support either Reform or the Conservatives. Both parties oppose net zero by 2050. It is therefore reasonable to assume, as I told the board, that many with L&G pensions, do not want their retirement outcomes subordinated to the green agenda.
In response, the board told me that its clients want to align with net zero by 2050. Whilst the board acknowledged that complex trade-offs exist, they did not explain what these were. Instead they doubled down, reaffirming their net zero commitment, before asserting that decarbonisation offers stellar investment opportunities.
The problem is that these opportunities rely on government subsidy.
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