The East Sussex Pension Fund, a UK local authority fund, is clearing fossil fuel companies from half of its passive equities portfolio, by using Norway’s Storebrand group as the new manager of £400m (€440m) of its global equities within a climate-tilted index fund.
Storebrand announced the £3.9bn UK pension fund had selected its Storebrand Global ESG Plus strategy for half of its indexed equities, saying this was the Norwegian financial group’s first major UK pension fund mandate win.
Councillor Gerard Fox, chair of the East Sussex Pension Fund, said: “Investing in generic passive indices, while a perfectly acceptable part of any pension strategy, tends to weight exposure to older and often more carbon intensive incumbents over which no investor due diligence has taken place.”
Fox said the energy transition presented challenges that touched every country, sector and company.
“For an LGPS [Local Government Pension Scheme] fund it defies simple investment versus divestment decisions, requiring company engagement and a whole portfolio approach,” he said.
Storebrand described its Global ESG Plus strategy as a “fossil-free equity strategy that aims for long-term alignment with the Paris Agreement goals and exhibits lower carbon risk with higher climate solutions and ESG scores than the world index”.
Jan Erik Saugestad, chief executive officer of Storebrand Asset Management, said the East Sussex investment represented an important step for his group’s international development and was a welcome endorsement of its sustainable investment solutions.
Last week, LGIM announced the launch of a climate transition index fund based on FTSE Russell’s FTSE Global Equity Index Series and adjusted based on companies’ fossil fuel reserves, carbon emissions and green revenues.
The UK pension scheme of multinational IT company Atos put an initial investment into the new fund, and online pension consolidation platform PensionBee is to offer it as an investment option, LGIM said.