People’s Pension halves carbon footprint of main default fund

The master trust reported this week that its Global Investments (up to 85% shares) Fund – which is the default accumulation fund and accounts for 80% of its total assets – had reduced its carbon emissions by 53%, compared to its 2022-23 figure.

The reduction is equivalent to a drop of 35.3 tonnes of carbon dioxide emitted per £1m invested, according to the People’s Pension’s latest Taskforce on Climate-related Financial Disclosures (TCFD) report.

The result follows the trust’s move in March to shift £15bn – approximately half its assets – into “climate-aware” strategies. This allocation is now worth £18bn, People’s said.

In the 12 months to the end of September, the Global Investments Fund returned 19.4%, according to the People’s Pension. This eclipsed the 4.2% return from its target benchmark.

Longer term, the fund is slightly behind its target, having gained 5.8% a year over five years, compared to 6.8% from its benchmark.

In a statement, the master trust said: “It had been anticipated that this allocation of funds would reduce carbon emissions of the relevant fund by at least 30%, but the new data shows this reduction is significantly higher.”

Dan Mikulskis, chief investment officer at People’s Partnership, provider of The People’s Pension, said: “With greater size comes greater responsibility. We are committed to doing what we can to make sure the companies we invest in follow certain standards particularly in material sectors and in our priority areas of climate, nature and human rights.”

He added: “Portfolio changes are one pillar of our strategy here, the other being our stewardship approach which is driven by the scheme’s recently published Responsible Investment Policy.”

The master trust has added a separate nature-themed section to its TCFD report, which it said would make the document its leading source of information on responsible investment.

Remaining carbon emissions

There are three industry sectors now responsible for 70% of the carbon emissions remaining in the People’s Pension portfolio, following the asset allocation change earlier this year.

The TCFD report listed these as materials, utilities and industrials, and explained that between 40% and 60% of the portfolio companies within these sectors have set science-based targets to reduce their emissions.

The People’s Pension measures its equity investments against indices that aim to reduce emissions by 7% a year, in line with the 2015 Paris Agreement on Climate Change.

Mark Condron, chair of The People’s Pension trustee board, said: “This report tells a compelling story about how we use our size and influence to ensure our members’ savings are allocated and managed responsibly and reinforces our commitment to tackling climate change through investing.”

The news comes after a United Nations (UN) report revealed that current national-level climate change plans fell “miles short” of what was needed to avert a major climate crisis.

“Current national climate plans fall miles short of what’s needed to stop global heating from crippling every economy, and wrecking billions of lives and livelihoods across every country,” the UN said in a statement released last month.

“Bolder new climate plans are vital to drive stronger investment, economic growth and opportunity, more jobs, less pollution, better health and lower costs, more secure and affordable clean energy, among many others benefits.”

Further reading

‘Companies are not listening to us’: DC schemes’ net zero challenges (28 October 2024)

NOW Pensions accelerates climate action (23 October 2024)

ESG reporting for pension schemes ‘needs overhaul’ to improve effectiveness (3 October 2024)