Haringey Local Government Pension Fund, which provides pensions for employees of the London Borough of Haringey, has announced it will move one-third of its equity funds – roughly equivalent to £200m (€263m) – into a low-carbon fund.

The decision, made at a pensions committee meeting earlier this month, followed lobbying by borough residents and groups including Friends of the Earth and Muswell Hill Sustainability Group.

As at 31 March, the pension fund portfolio was worth £1bn, having returned 16.1% for the previous 12 months, 0.75% less than target.

At that date, 50% of the portfolio was invested in overseas equities and 16% in UK equities.

A report prepared for the pensions committee by council officers shows that, at mid-December 2015, equity investments were worth £724m.

This is spread across six regional indices, each with a fossil fuel sector, varying between 1% (Japan) and 9% (UK).

The aggregate monetary value of the fund’s exposures to the fossil fuel sector was £39m.

Haringey runs passive global equity and bond mandates with BlackRock (52.5% of total assets as at 31 March) and Legal & General Investment Management (27.8% of total assets).

The committee has now decided to move one-third of the passive equity exposure into the MSCI World Low Carbon Target Index Fund, run by LGIM.

As a result, the pension fund will own no investments in coal industries anywhere in the world.

It has also decided to explore making specific investments in low-carbon economy sectors, such as renewable energy.

The pensions committee were advised by Mercer, which was of the opinion that: “Excluding a particular sector or sub-sector from Haringey’s investment portfolio but retaining the current passive approach is feasible, with some cost implications.”

The report said Mercer’s preferred passive approach to low-carbon investing was to utilise LGIM’s capacity to invest in line with the MSCI World Low Carbon Target index fund.

The index reweights the constituents of the MSCI World index to reduce exposures to carbon emissions by 80%, while targeting a return closely correlated with the standard index.

The reduced carbon exposure is achieved by a reduction in exposure to the major oil companies.

Last June, the Environment Agency Pension Fund committed £280m to the same fund.

Cllr Joe Goldberg, Haringey Council’s cabinet member for economic development, social inclusion and sustainability, said: “When we are seeking to become London’s first zero-carbon borough, it doesn’t make sense for us to continue to invest in fossil fuels when we want to reduce, and indeed end, demand for them.”

He continued: “I’m proud the council’s pensions committee has agreed not only to move some funds into a low-carbon fund but to also consider investing in low-carbon industry, giving us the opportunity to tackle carbon emissions while still getting the best return on our pension fund.”