UK DC master trusts' progress towards achieving their net-zero goals
The largest UK defined contribution (DC) master trusts are making significant strides towards addressing climate change, with a focus on interim targets aiming for substantial emissions reductions by 2030. These targets are in line with net zero objectives and typically involve achieving Science Based Targets initiative (SBTi) metrics of around 60-65% emissions reductions by 2030.
One of the notable examples is the J.P. Morgan UK Pension Plan, which has committed to achieving an SBTi metric of 65% or higher by 2030. Other major master trusts have similarly set net zero targets along with interim carbon emission reduction goals around 2030, although the specific numeric targets vary by trust due to differences in investment strategies and asset composition.
The Aviva Master Trust, for instance, has a 2040 net zero ambition, which has been adopted for its standard and default strategies. Legal & General Master Trust's default options have already exceeded interim (2025) targets, and Target Date Funds are either 'at or ahead of' 2030 targets.
The People's Pension Master Trust, another key player, set a 2030 target for a 50% emissions intensity reduction in the scheme's growth assets and a 30% reduction for developed equity assets by 2025. The trust's new climate aware strategy in the developed equity portfolio contributes to its confidence in meeting the 2030 targets.
Cushon Master Trust aims for an 80% scope 1 and 2 emissions intensity reduction target in its Sustainable Investment Strategy portfolio (growth phase) by 2030, with a current reduction of 78%.
The net-zero strategies of DC master trusts are considered hugely consequential due to their role as hefty stewards of long-term capital. With assets under management currently standing at £122.8 billion, these strategies are expected to grow rapidly, potentially reaching £800 billion by the end of the decade.
Government policy pressures and forthcoming regulations are increasing the focus on climate goals in master trusts, especially given size thresholds (e.g., schemes needing £25bn in assets by 2030). These climate commitments are often integrated with broader ESG (Environmental, Social, and Governance) considerations in managing default investment options for millions of DC scheme members.
The consolidation of DC master trusts is also a topic of discussion, with the UK government pushing for multi-employer schemes to have minimum assets of £25-£50 billion. The People's Pension Master Trust did not announce an interim target until last year, citing the need for a plan in place to meet the target and trust in the data being used.
The update on the strategies of the largest master trusts in relation to Vision 2030 will be presented at the our website's Defined Contribution Forum in January 2025. This reflects a growing and coordinated effort across master trusts to address climate risk in pension investments.
- The climate-change focus in the UK's largest defined contribution (DC) master trusts extends beyond 2030, as evidenced by The People's Pension Master Trust's 2025 target for a 30% reduction in developed equity assets' emissions intensity.
- In alignment with the trend of integrating finance with environmental-science, many DC master trusts, like Cushon Master Trust, have set ambitious science-based targets, such as an 80% emissions intensity reduction in their Sustainable Investment Strategy portfolio by 2030.
