DB Trustees at buy-out stage, using insurers’ net zero targets to help them identify a partner, should focus on a firm’s performance against their interim emissions targets, says Hymans Robertson, as it launches its latest Risk Transfer ESG annual report – Insurers move towards net-zero goals on investment portfolios. Almost all firms say they aim to reach net zero by 2050. Therefore, a focus on interim emissions enables Trustees to better differentiate between firms and reduce the risk of choosing a partner that leaves them at risk of failing to meet their fiduciary duties, warns the leading pensions and financial services firm. 

The report is aimed at giving DB Trustees the deeper insight they need to easily compare how firms are performing against their emission targets. It looks specifically at insurers’ scope 1 and 2 emissions data which are more readily available and therefore allows Trustees to compare like-for-like.

Commenting on why DB Trustees should focus on emissions data over the long-term when assessing which pensions bulk annuity insurer to partner with, Paul Hewitson, Head of ESG for Risk Transfer said:

“Most if not all insurers in the pensions bulk annuity market have set ambitious goals to be carbon neutral by 2050, not only in their operations but also in their investment portfolios. With the bulk annuity market continuing to grow – nearly £50bn of assets were transferred to insurers in 2023 – insurers are rightly looking to show that they’re actively managing the impact of the climate crisis on their business.

“Trustees now also have more sustainability information available to them which is a good thing. But it is important that care is taken to get the most out of it. Our report focuses on scope 1 and 2 data because that is more readily available compared to scope 3, for example. This allows for like-for-like comparison in the short term, although all insurers will need to include scope 3 emissions data for their long-term net zero position. In addition, focusing on progress against interim targets provides Trustees with a better indicator of whether a firm will achieve their longer-term goals and then be able to fulfil their obligations to members.”