The Environment Agency Active Pension Fund has said it is seeking “new and innovative ideas” on sustainable equity investment in a bid to lead best practice in the area while driving forward its responsible investment strategy.
There has been pressure on pension schemes to improve sustainable investment practices following high-profile incidents such as the BP Deepwater oil spill.
The £2.1bn scheme has focused on sustainable investment for nearly a decade, with the current phase of its sustainability strategy seeing it invest in real assets such as eco-friendly offices.
Environment Agency Active Pension Fund: in numbers
Fund value: £2.1bn
Deficit: £95m
Active members: 11,379
Deferred members: 6,624
Current pensioners: 5,111
Source: Annual report and financial statements 2012/13
The scheme now wants to explore how it can improve its sustainable equities activities, to which it currently allocates 25 per cent of the fund. It is currently looking for “new and innovative ideas” and hopes to launch the plans in the autumn.
Faith Ward, investment manager at the fund, said: “We believe [the] sustainable equities market has matured and there are some good quality funds and innovative ideas [but] to maintain our leadership we are looking for the best managers to combine [the] latest investment thinking.”
Responsible and sustainable investment has increasingly become an important part of schemes’ ethos.
The total UK managed assets in sustainability themed investments is estimated to be more than £7bn, according to figures from the Eurosif European Sustainable and Responsible Investment Study 2012.
Low carbon investment
Vincent Neate, head of sustainability at KPMG, said there were often two different attitudes from schemes on sustainable and responsible investment.
“One is a specific, ‘Actually, I want to find green investments to invest in’ kind of fund, and then there is the, ‘We want to be an ethical fund’,” he said. “There are those two different routes, but both are growing.”
The current phase of the agency’s responsible and sustainable investment work recently saw it increase its allocation to real assets such as property, following a strategy review.
As a result, it has been announced that it will invest in the Low Carbon Workplace Trust, alongside Clwyd Pension Fund.
The trust is a partnership between Threadneedle Investments, commercial real estate developers Stanhope, and the Carbon Trust, which aims to build and manage eco-friendly offices.
Such investments were appealing to public sector funds that were under increasing pressure to think about the environment, alongside potential long term income, said Nick Ring, head of distribution at Threadneedle Asset Management.
"Public sector pension schemes, in particular local government pensions schemes, are continually scrutinised by external stakeholders to find investment strategies that deliver a genuinely attractive investment return while also delivering on environmental and sustainability issues," he added.
The Environment Agency said it also plans to make commitments to sustainable infrastructure mandates in the next 12 months.
