Haringey Pension Fund invests in Low Carbon Emerging Equity Fund
Haringey Pension Fund invests in Low Carbon Emerging Equity Fund:
The London Borough of Haringey Pension Fund is to be the seed investor in a MSCI Emerging Markets Low Carbon Target Index Fund managed by Legal & General Investment Management (LGIM), following investment advice from Mercer. This low carbon fund aims to reduce exposure to carbon emissions of these investments by an estimated 73% compared to the fund’s previous emerging market investments.
Haringey Pension Fund has around £1.4bn assets under management, £0.1bn of which was previously invested in an emerging market equity fund, all of which will transfer into the low carbon fund. The decision to invest in the fund was made after the committee held several strategic meetings throughout 2019 to consider the best options to continue to invest in Emerging Markets Equity but reduce exposure to carbon emissions and fossil fuels.
This decision was driven by the belief that climate change and significant investments in fossil fuels present a long-term financial risk to the pension fund. This investment, in combination with the fund’s existing holding in the MSCI World Low Carbon Target Index represents approximately 26% of the fund’s investments (with the remainder invested in a wide range of assets).
The pension fund’s allocation to funds which focus on reducing exposure to carbon emissions is not the only strand to the fund’s ESG (environmental social and corporate governance) policy. The fund has previously committed to invest c. 5% of the fund (£70m), in renewable energy infrastructure, which the fund believes will deliver the required returns for the fund, and also make a meaningful and impactful contribution to positive environmental practices.
Cllr Matt White, Chair of Haringey combined Pensions Committee and Board (PCB) says: “I’m happy that Haringey Pension Fund has once again shown that we’re a leader in ensuring our investments have a positive environmental impact. This decision by the PCB is in line with Haringey Council’s recent climate emergency declaration and demonstrates that we can make a contribution to combatting catastrophic climate change without reducing the returns on our investments. I hope other LGPS funds will also consider reducing the carbon footprint of their emerging markets investments.”
James Sparshott, Head of Local Authorities, Legal & General Investment Management (LGIM) says: “We are delighted to be managing this mandate for Haringey Pension Fund. We recognise the urgency of addressing climate change and continue to experience demand for low-carbon mainstream investment strategies. We believe that taking early action on climate is in the interest of long-term investors, and this fund will benefit from LGIM’s track record in working with the companies in which we invest to improve their resilience to climate risks and build businesses for a sustainable future.’’
Steve Turner, Partner at Mercer and Investment Consultant to the Fund, says: “Emerging Market equities have a relatively high carbon intensity but an attractive long-term expected return profile. This is a best of both solution, allowing the Fund to have exposure to this attractive, long-term asset class, but with significantly lower carbon exposure”.