Our latest progress to Net Zero

Paying members’ pensions and investing in their best financial interests are two of our legal duties. To achieve this, we need to protect our investments from the financial risks of climate change and find ways to benefit from the investment opportunities it might bring. We believe climate change presents a significant financial risk and that a low carbon world will likely be a more financially stable one. That’s why we’ve set an ambition for our investments to be Net Zero by 2050, if not before.

Each year, we report on how we’re tackling the financial risks of climate change in our Taskforce for Climate-related Financial Disclosures (TCFD) Report. TCFD is an industry-led framework that helps companies like us to understand and disclose their financial exposure to climate risk. Our latest 2023 TCFD Report sets out the progress we’re making and what we’ve done over the past year to tackle this challenging issue.

Our teams right across the business have been working hard in the background to progress towards our Net Zero ambition. Some of the key things we’ve been working on include:

• Investing around £2bn in renewable energy and clean technologies – this includes a 50% stake in Bruc Energy, which runs solar farms across Spain.

• Measuring Scope 3 emissions for around half of our corporate assets for the first time – these are emissions that aren’t produced by the company itself but those it’s indirectly responsible for. However, the availability and reliability of Scope 3 data remains poor.

• Reviewing and improving how we capture and measure climate data, which gave us better estimates of the emissions our investments are responsible for.

• Developing better climate scenarios with the University of Exeter. Analysing potential climate scenarios for the future helps us understand how our investments might perform under a range of potential climate outcomes.

• Encouraging Cemex – one of the world’s largest cement companies and one of our highest carbon emitters – to set more ambitious carbon reduction targets. Cemex is now set to reach its 2030 decarbonisation target five years earlier than planned and has introduced new lower-carbon concrete products.

• Investing in electric-powered aviation and carbon capture through our new £500m Sustainable Growth mandate. This mandate invests in high growth, privately-owned businesses that are developing services to help the economy to decarbonise.

While these activities, alongside others, have helped us to reduce our own carbon emissions intensity by 21% since 2019, we, and the wider world, still have a long way to go. Despite our progress, we’re aware that the world isn’t decarbonising fast enough. We are keen to see more real-world change and that’s why we’ll continue encouraging the highest emitting companies we invest in to reduce their carbon emissions. As a long-term investor, we have a responsibility to do this by actively engaging with the companies we invest in to drive positive change. And it is these higher-emitting companies that can have the greatest real-world impact, by shifting their ‘business as usual’ models to ones that drive change and push for a lower-carbon future.

But we can’t get there on our own. The entire economy needs to decarbonise, not just USS. To address climate change effectively we must work together with other pension funds, investors, and policy makers to push for change. The Government and regulators have a huge part to play here, not least by ensuring a predictable, transparent, and stable regulatory environment for renewable energy assets and by raising energy efficiency standards. The transition to a lower carbon world will also require further investment into renewable energy and infrastructure, which policy makers can facilitate. We’re always looking for opportunities to increase our investments in climate solutions, but there are limited opportunities out there.

So yes, we have made good progress towards our interim targets, but we acknowledge that there’s still more to do. Governments and policymakers around the world must play their part and investors must work together, learning from each other. The journey to Net Zero will be tough and won’t be linear, and we know that small changes to our portfolio can have a big impact on our carbon footprint. So, we may sometimes overshoot and sometimes undershoot our targets, but we will remain committed to our long-term ambition.

For more on our latest progress, see our TCFD summary or our full 2023 TCFD Report. You can also visit our new Net Zero page .