Pension fund to move toward low carbon index tracking fund

ONE of Wales’ biggest local government pension funds has begun the process of reducing its exposure to investments in firms with high carbon footprints.

The City & County of Swansea Local Government Pension Scheme manages £2.1bn of funds for the local authorities of Swansea and Neath Port Talbot, as well as a number of other employers in the region.

In the first phase it is moving £500m of the fund’s invested portfolio into a low carbon index tracking fund – a process that will be completed by the end of this month.

The fund is managed by fund manager Blackrock.

Clive Lloyd, deputy leader of Swansea Council and chair of the scheme’s pension fund committee, said: “Like many other pension funds, we think carefully about how the investments we manage for thousands of existing contributors and pensioners are able to maximise the required returns, whilst also being mindful of our responsibilities to the environment and future generations.

“That’s why last year we were the first local government pension scheme in Wales – and among only a small number in the world – to commission a review of our equity investment portfolio to find out the exact extent of our carbon and fossil fuel related investments.

“The review showed that our investments in carbon-related industries were already 9% below the pension industry average.

“But over the coming years, it is important that the world reduces its reliance on fossil fuels and carbonbased products, so it’s important that our investments reflect that too.

“Since the review, the committee has been looking carefully at the potential impact on the fund of reducing its listed equity exposure to investments in fossil fuel companies by up to 50% by 2022.

“This initial transition of £500m will go a considerable way to meeting our commitment.”

Mr Lloyd said the fund’s focus was ensuring that the return on its investments were significant to fund pensions for its members.

He added: “As a very long-term investor we also need to ensure the money we manage and invest on behalf of our members balances the need for a sufficient investment return while at the same time reducing our exposure to carbon and fossil fuel-producing firms as we make the transition to a low carbon economy.”