Pension Fund completes £840 million equity restructure to help meet carbon target
Hackney Council’s Pensions Committee is taking another big step towards a fossil free pension fund after approving ambitious plans to cut the fund’s exposure to future CO2 emissions.
A total of nearly £840m was included in a restructure of the Pension Fund’s equity portfolio, helping to meet the Council's asset pooling and low carbon commitments.
This move follows a review which looked at the financial risks posed to the pension fund’s fossil fuel investments in light of the Paris Agreement, a global action plan to help limit global warming.
The Fund has invested 10% (approx. £150m) of the Fund’s assets in Blackrock’s newly created MSCI Low Carbon Target Fund, this reduces the funds exposure to fossil fuels and carbon emissions while still offering access to a wide range of global markets. The allocation has been funded by reducing exposure to the FTSE Allshare Index, which represents the Funds most significant exposure to fossil fuel companies. A further £195m has been invested in RBC GAM’s Global Sustainable Equity strategy via the London CIV. The strategy aims to invest in companies with long term, sustainable revenues, with a strong focus on Environmental, Social and Governance (ESG) factors.
The changes are accompanied by other shifts in the fund’s active and passive equity portfolios to help pool the Fund's assets, with the remaining UK passive allocation (FTSE Allshare) of £150m moved to BlackRock. The Fund has also invested £340m in BlackRock’s passive global equity fund (MSCI World), funded from its former active global equity mandates. These changes are helping the Fund fulfil its asset pooling commitments, and further changes may be made as the London CIV develops the full range of investment options necessary to deliver the Fund's investment strategy.
Climate change is probably the greatest threat facing humankind. The Hackney Pension Fund committed to reduce its exposure to fossil fuel reserves by 50%, reducing the Fund’s exposure to carbon risk and aligning it with the 2 degrees scenario set out in the Paris Agreement. To help us move towards this target, we have made significant investments in two different strategies aimed at reducing our carbon exposure.
In the longer term, the Committee wish to make a positive contribution to the transition to a low carbon economy, as well as reducing risk, and are considering options for how this can be done in a way that complements the Fund’s wider investment strategy and approach to asset pooling.