The People’s Pension halves carbon footprint, launches enhanced ethical fund
The People’s Pension, one of the largest master trusts in the UK, has significantly cut the carbon footprint of its main default fund while also launching a fossil fuel-free Enhanced Ethical Fund.
The People’s Partnership, provider of the People's Pension, which manages around £38bn in assets on behalf of seven million members, has drastically reduced the carbon emissions of its main investment fund following a decision to change investment managers at the beginning of this year.
In February, the master trust announced that it was shifting around £28bn, the bulk of its main default fund, out of State Street Mandates, allocating the assets instead to climate-aware segregated mandates managed by Amundi and Invesco.
Nearly a year on, the pension fund has released its TCFD report and its initial responsible investment update, revealing that carbon emissions within the scheme’s Global Investments fund (up to 85% in shares) have fallen by 53%.
The reduction exceeded the pension fund’s initial estimates. It had hoped to cut its climate footprint by 30%, but the TCFD report showed a significantly higher decrease.
While the scheme’s assets have grown by £8bn over the past 12 months, the total carbon emissions of the fund have dropped by approximately 400,000 tonnes of CO2e, which is equivalent to a reduction of 35.3 tonnes of CO2e per £1mn invested, the fund said.
Cassandra Traeger, stewardship manager at People’s Partnership said: “We’ve made great progress in aligning more closely with our Responsible Investment Policy through the appointment of our new asset managers, Amundi and Invesco.
“As a universal asset owner, we recognise that our greatest impact is not on a company-by-company basis, but by addressing systemic issues that affect entire sectors and economies. We believe this shift will deliver greater impact for our members than any individual company engagement or proxy vote could achieve on its own. This approach underpins our commitment to improving sustainability across markets.”
Like many of its peers, The People’s Pension reported that a handful of stocks account for the lion’s share of its emissions. The 19 biggest emitters in the portfolio account for only 1.5% of AUM but a third of total emissions, Dan Mikulskis, CIO of the People’s Partnership, pointed out.
Alongside its emission reductions at portfolio level, the People's Pension plans to increasingly intervene in the wider net zero debate as a universal owner, amplifying its influence through collaboration with other investors, among others through the FRC’s UK Stewardship Code consultation, the FCA’s consultation on changes to the pension's regulatory framework, and the Asset Owner Statement on Climate Stewardship.
In a bid to offer members access to a wider range of climate-conscious investment choices, the manager has also launched an Enhanced Ethical Fund in October, which fully excludes investments in fossil fuels, tobacco, gambling and weapons. The new vehicle builds on its existing Ethical Fund offering but now offers significantly more exclusions, such as a blanket exclusion for fossil fuels, including the value chains of coal, oil, gas, and carbon-intensive power generation, a spokesperson for the People's Partnership told Net Zero Investor.
DC providers often struggle to gauge member appetite for such approaches, with DC members having historically shown very little engagement with their pension providers.
A survey conducted by YouGov among pension members in the UK, released as part of the People’s Partnership’s Responsible Investment Report, found that around 61% of respondents attach some degree of importance to the inclusion of ESG criteria in their pension. At the same time, 42% said they had ‘no idea’ what the acronym meant, while a further 26% said they were unsure.
