The United Kingdom’s largest workplace pension plan is set to move 70 percent of its assets into climate-aware strategies, the fund announced Tuesday.
The People’s Pension, which manages £25 billion ($31.87 billion), will move £15 billion of its assets into strategies aligned with the Paris Agreement.
The news comes amid a fractured time in ESG investing, particularly in the U.S. Lawmakers in many Republican-dominated states have either proposed or passed measures to prevent public pensions from investing their capital in ESG-aligned strategies. But the Securities and Exchange Commission also voted 3-2 on Wednesday to adopt rules to strengthen and standardize climate-related disclosures by public companies and in public offerings.
In February, the U.K.’s Financial Markets Law Committee addressed the relationship between sustainable investing and fiduciary duty.
The committee’s conclusions were the opposite of some U.S. lawmakers: Taking climate change and sustainability into account while investing “may reveal new understandings of unrewarded or unmanaged risks or illuminate true return.” In other words, U.K. funds can consider ESG and climate change when they make an investment decision.
“Asset owners like us are uniquely positioned to use our size and influence to ensure our members’ savings are allocated and managed responsibly, and that the companies in which we invest are acting in responsible and sustainable ways,” said chief investment officer Dan Mikulskis in a statement.
The People’s Pension will divest completely from companies that produce thermal coal. The group will also adjust their level of investment in companies based on their exposure to climate risk.
The pension expects the immediate effect of these changes to be a 30 percent reduction in the carbon footprint of the plan. Every year thereafter, the fund expects to reduce emissions further by 7 percent.
“Key to our investment philosophy is conviction in what we do — if we really believe in something we want to make it core to our members’ retirement savings, rather than a tick to a box, and that’s what we’ve done here,” Mikulskis said.
The People’s Pension believes that this change will not only get the fund closer to net zero by 2050, but it will also reduce the long-term risks posed to investments, which “aren’t currently being priced by the market,” according to its announcement.
The announcement comes on the heels of another major commitment to impact: In late February, the California Endowment announced that it would plow the entirety of its $4 billion in assets into mission-related investments.
Those investments are focused more on mission-related activities than climate change. However, it’s part of a trend of institutions moving assets into programs aligned with their nonprofit’s mission. These include the Nathan Cummings Foundation and the Heron Foundation, both of which have moved all of their investments into mission-related assets.
