National Employment Savings Trust to move investments into new climate change fund and scale back shares in firms such as Shell and ExxonMobil

A giant pension scheme with more than 4 million members is shifting almost 10% of its investments into a new climate change fund designed to move people’s money out of fossil fuels and into renewable energy.



Nest (National Employment Savings Trust), a publicly owned scheme set up by the government, said it was moving £130m into the fund because it wanted to protect its worker members from the risks associated with climate change by reducing their exposure to companies with reserves of coal, oil and gas.



Nest has named oil groups Shell and ExxonMobil as two of the companies in which it is set to scale back its investment, with SSE, one of Britain’s biggest energy firms, one of those likely to be a beneficiary of the new strategy.



The move has been welcomed by climate change campaigners and comes amid an ongoing global carbon divestment campaign that has succeeded in persuading hundreds of institutions, including universities, pension funds and charitable foundations, to dump billions of pounds of shares in carbon-intensive industries. The Guardian has been running its own campaign called Keep it in the ground.



The move by Nest is notable because it is a public body – it was set up by the government to help employers meet their obligations under the automatic enrolment retirement saving initiative, which went live in 2012. Nest is now looking after the pension pots of more than 4 million UK workers, investing £1.5bn on their behalf, and has signed up more than 290,000 employers. These numbers are expected to increase markedly over the next few years, making Nest a major shareholder and, it hopes, a difficult voice to ignore.



Most of the money looked after by Nest is invested in its retirement date funds – there are 47 of these, with each worker put into the one appropriate for their age. It is £130m of this total pot that is being moved into a new “climate-aware” fund managed by UBS Asset Management, which has been developed to allow members to “benefit from the transition to a low-carbon economy”.



However, Nest is not describing this as a divestment strategy because it is not pulling all of its funds out of oil, gas and coal companies. Instead, it will apply a positive “tilt” that will increase investment in companies identified as vital to combating climate change, such as those working on renewable energy or those that are making the necessary changes to adapt to a lower-carbon future. At the same time it will reduce investment in companies that are heavy carbon emitters, have fossil fuel reserves or are not making the sorts of changes needed to meet emission reduction targets.



The focus will also be on engagement, to encourage companies to improve and future-proof their business models.



A Nest spokeswoman said: “This move sends a strong message to companies Nest invests in that it expects to see measurable progress towards environmental sustainability.”



The plan is that younger workers will have greater exposure to the new fund than older members because it is the former who are more likely to be impacted by the move to a lower-carbon economy.



Mark Fawcett, chief investment officer of Nest, said: “As responsible long-term investors on behalf of our members, we can’t afford to ignore climate change risks, and we’ve committed to being part of the solution.”



Sectors where Nest/UBS will be investing less than they would otherwise include mining, oil and gas, beverages, aerospace and defence, travel and leisure, and food production. Companies where they expect to “dial down” investment include Shell, ExxonMobil and fellow oil company Chevron, plus BHP Billiton, the world’s biggest mining firm.

SSE is one of the companies where Nest is likely to increase its investment. In the first six months of 2016-17, SSE invested around £125m in renewable generation and aims to reduce the carbon intensity of its overall electricity generation by 50% between 2006 and 2020.

