Nest unveils plans to ramp up green energy investments

The move would grow the proportion of its total portfolio invested in emerging markets from 3.6 per cent to six per cent

Nest has unveiled plans to ramp up its investment in energy efficiency upgrades, renewables, and green buildings in a bid to slash the carbon footprint of its portfolio and take advantage of "exciting" growth areas in emerging markets, it announced yesterday on 15 December.

Kicking off the latest stage of its 2050 net-zero strategy, Nest said it planned to almost double its investment in emerging market equities from around £480m to an estimated £930m by February next year, while reducing investments in fossil fuels and carbon-intensive firms.

The move would grow the proportion of its total portfolio invested in emerging markets from 3.6 per cent to six per cent, it said, noting that such markets were set to continue outpacing growth in developed markets "driven by younger populations and a rising middle class".

The move will also take Nest's investments in dedicated "climate-aware" strategies to almost £8bn from February 2021, which would represent over half (51%) of the pension scheme's overall portfolio, up from around 45% at present.

Nest head of responsible investment Diandra Soobiah argued increasing investments in developing and green markets would help keep the pension scheme ahead of growing demand for sustainable investments and reduce climate risk across its portfolio.

Over the next 10 to 20 years countries like China and India are expected to see huge increases in urbanisation, she explained. Many emerging economies are also thinking hard about how to harness green technology to fuel their growth and leapfrog the dirtier industrialisation trends of the past. This presents opportunities for investors.

Soobiah said it was therefore "crucial" for investors to be 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, she said.