Several local authority pension funds will tailor their investment strategy to meet the Paris climate agreement, following pressure from campaigners on the sector’s environmental impact.
Pension funds for Merseyside, Islington, Lewisham and the Environment Agency, as well as the Brunel Pension Partnership pool, are backing the agreement’s goals, intended to keep temperatures no more than 2 degrees Celsius above pre-industrial levels.
Under the plan, the funds have committed to boost their assets in low-carbon investments like sustainable infrastructure, cut exposure to high-carbon assets, and engage robustly with firms they are invested in.
Paul Doughty, chairman of Merseyside Pension Fund, said he hoped others in the Local Government Pension Scheme (LGPS) would follow the lead of funds like his.
“In 2018 [our fund] aims to reinvest one third of our passive equities in the UK and North America markets to a low-carbon benchmark,” he said.
“We also plan to continue to increase our significant investment in infrastructure, with an expected £250m investment in renewables by 2020.”
The move, organised by pressure group ShareAction, follows recent controversy over LGPS funds investing in companies felt by some to be damaging the environment.
A campaign in September led by Friends of the Earth criticised local authority pension funds for investing in fracking companies, which inject liquid underground to extract oil and gas.
Though campaigners have called for divestment from fracking firms, some working within the LGPS have argued that engaging with firms is a better means of promoting practices that are good for the environment.
Denise Le Gal, chair of Brunel, said: “Brunel is committed to being 100% climate aware. We are de-carbonising listed portfolios through investment risk analysis, engagement and using tools such as [the Transition Pathway Initiative] and carbon footprinting.
“We have also designed portfolios to enable clients to invest in low carbon opportunities and are fully committed to reporting in line with the Task Force on Climate-related Financial Disclosure.”