Climate Policy and TCFD report

Thanks for joining us today for our inaugural Trustee Talks video. The Trustees of the Legal & General Mastertrust look after the pension savings of 1.2m members across 180 different employers. It's an important role and one that the Trustees take very seriously.

We felt these Trustee Talks' clips presented a real opportunity to introduce members and employers to our Trustees and talk about a particular subject we're focusing on at the moment.

My name's Kim Brown and I'm the Pension Scheme Director of the Mastertrust and I'll be walking you through these series of videos.

Kicking us off today is Catherine Redmond and we'll be discussing the link between pension scheme investments and climate change.

Welcome Catherine. Could I ask you to start by just introducing yourself.

Thanks Kim. I'm a professional pensions trustee and I work with a range of UK based pension schemes. I've been the Legal & General Mastertrust, on the board, for a year now. And I also chair the investment subcommittee.

Thanks, Catherine. And what drew you to trusteeship?

So, in terms of what drew me to trusteeship, it's a really interesting and varied role, and the role involves overseeing the member experience from the time they join right through to when they retire.

So for example, it encompasses developing a communication strategy in terms of how we engage members. Thinking about how we invest money on their behalf. And ultimately supporting them when they get to the point of securing a financial income for their retirement.

And is there anything else that our members might want to know about you?

I'm not sure there is actually, but I had to think about that one. I think the silver lining of lockdown for me has been the opportunity to do a lot more reading than I normally would. So if we are in lockdown and people are watching this and they're looking for a good book recommendation, I'm halfway through Barack Obama's memoirs "A Promised Land" and I can highly recommend them.

Excellent. And turning to our topic today, and like many of our members, I'm not an investment expert. So can you start with the basics of what do pensions have to do with climate change?

Yeah. So interestingly pensions can have a much more direct impact on climate change than you might think.

So for example, when members pay money into the Mastertrust, we then invest that money on their behalf, and typically a large proportion of it will be invested in the shares of companies. Of course, what that means is we have choices to make about which companies we select. And increasingly, we tend to choose companies that have policies and practices that are very much aligned with the need to prevent climate change as much as possible.

So that's just one example of how there can be a direct link and indeed a very positive impact in terms of pensions and climate change.

And what's the net zero target? And again, what does that have to do with pensions?

So the net zero target, I'm sure you'll be aware and and most of our members will be aware, is that the UK has made a very public commitment to reach a net zero target in terms of carbon emissions by 2050. What that effectively means is that in order to achieve that target, most companies and indeed individuals will also need to align their behaviours with the achievement of a net zero target.

So when as trustees, we come to investing members' money, the options available to us in terms of companies and other forms of investment, increasingly over time, will by definition have to be aligned with the achievement of a net zero target.

And why do you think all of this is important to our members?

So there are actually a couple of reasons that I think this is very important to our members.

The first one I would highlight is that as you can imagine, with a membership of 1.2 million members, we have a huge, a hugely diverse range of views about climate change and about the importance of having a positive impact.

But notwithstanding that, it is very clear from the research we've undertaken that an increasing proportion of our members, do feel that climate change matters and they want us to invest in a way that is supportive of the climate.

The second reason that it matters to our members, is that as a pensions trustee, one of our key responsibilities is to optimise member financial outcomes at retirement. Increasingly, the risks relating to climate change are recognised as a key financial and investment risk. So in order to fulfil our responsibility to members and ensure that we obtain the best financial outcome, it's very important that we are mindful of developments in the climate change area.

And finally, can you talk me through how the trustees of the L&G Mastetrust are overseeing progress towards net zero?

So, as you know, Legal & General has already made a public commitment to the achievement of net zero in terms of carbon emissions by 2050.

At the moment, the majority of our members' funds are invested in what we call default funds and Legal & General has now gone a step further and announced some other key targets that will be achieved over the next 10 years. So whilst it varies according to which particular default fund you happen to be invested in, what Legal & General has said is that they intend to have carbon emissions of up to 50% by 2025 and up to 65% by 2030.

So in terms of our ability as Trustees to oversee progress, this is a hugely helpful step forward because it enables us to manage the, or to have visibility of, the achievement of those key metrics and to engage in a much more meaningful conversation with Legal & General on behalf of our members than we would otherwise be able to.

Great. Catherine, thank you so much for joining me today.

And thank you for watching. We really hope you enjoyed this clip. And more Trustee Talks to follow.