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Hackney to halve pension fund fossil fuel exposure

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Hackney LBC is to reduce its pension fund investments by 50% over the next six years.

The London borough’s pension fund committee plans to “move away from fossil fuel investment” entirely in the long-term, according to a statement.

The committee voted on 24 January to include a commitment to reducing its exposure to fossil fuels in its new investment strategy, which all Local Government Pension Scheme funds must publish under regulations that came into force last year.

Hackney’s pension fund committee papers state that the fund had a carbon risk audit carried out by Trucost in 2016. This assessed the fund’s exposure to fossil fuel reserves and the risk of these assets becoming devalued or worthless, known as “stranded”, as governments take action to limit C02 emissions.

The report said that Hackney’s assets most at risk of becoming stranded were coal reserves within its passive UK equity portfolio, managed by UBS, and its active emerging markets equity portfolio, managed by Royal Bank of Scotland. The oil and gas reserves Hackney has invested in through its global equity mandates with Lazard and Wellington were also at risk, according to the report.

In light of this, the committee has voted to reduce its exposure to future emissions from fossil fuel reserves, measured in tonnes of C02, by 50% over two triennial valuation cycles.

Robert Chapman (Lab), chair of the pension committee, said: “The fund’s long-term ambition is to move away from fossil fuel investments, and I can foresee a time when our fund will have no fossil fuel investments.

“We are the first London borough to set ourselves a clear risk reduction target within a realistic amount of time in order to make the necessary changes with the minimum of risk.”

Cllr Chapman added that Hackney has further plans to move the fund towards greener investments, but added: “Our first responsibility is towards those whose pensions we manage as well as other stakeholders, which include local council taxpayers.

“We have to ensure that the pension fund receives the best returns possible, and also comply with the various legal duties associated with managing a large pension fund.”

Hackney’s move comes after London mayor Sadiq Khan appointed Sir Merrick Cockell as chair of the London Pension Fund Authority, with instructions to divest the fund from all fossil fuels.

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