DB trustees who are in the process of reaching the buyout stage and are looking to select an insurer based on their net-zero targets should pay attention to how well a firm is meeting its interim emissions goals, according to insights from Hymans Robertson.
The firm’s ESG annual report for risk transfer was crafted to offer trustees the necessary information to assess how different firms are performing in relation to their emission targets. Specifically, the report examines insurers’ scope one and two emissions data, which are more easily accessible for comparison purposes.
A key finding of the report is that many insurers are aiming to achieve carbon neutrality in their investments by 2050 or even earlier, with all of them establishing interim targets. By focusing on interim emissions, trustees can more effectively distinguish between firms and lower the likelihood of partnering with an entity that may jeopardize their fiduciary responsibilities.
Paul Hewitson, Hymans Robertson’s head of ESG for risk transfer, highlighted the significant progress made by insurers in the pensions bulk annuity market towards becoming carbon neutral by 2050. As this market continues to expand, with nearly £50bn of assets transferred to insurers in 2023, insurers are demonstrating their commitment to managing the impact of climate change on their operations.
While trustees now have access to more sustainability data, Hewitson emphasized the importance of utilizing this information effectively. The focus on scope one and two data allows for immediate comparisons among insurers, although it is acknowledged that scope three emissions data will be crucial for achieving long-term net-zero objectives.
Furthermore, assessing firms’ progress against interim targets can serve as a reliable indicator of their ability to meet overarching goals and fulfill obligations to members in the future. This approach enables trustees to make informed decisions that align with their commitment to sustainability and responsible investing.
In conclusion, trustees navigating the complexities of selecting an insurer for their DB schemes can leverage insights from Hymans Robertson’s ESG annual report to prioritize firms’ performance in meeting interim emissions targets. By focusing on these key areas, trustees can enhance their due diligence process and align their choices with broader sustainability objectives in the pension industry.