Cushon Master Trust has joined forces with Wellington Management and Lombard Odier Investment Managers as part of its new green impact investment strategy launching in early 2022.

Wellington and Lombard Odier will manage listed bonds focusing on the most promising companies that are accelerating towards net zero with the aim of supporting that transition – aiming to deliver safer long-term returns, the master trust announced.

Wellington will manage impact bonds with both a climate and social focus, whilst Lombard Odier will manage bonds focussed on positive climate impact and funding companies working towards a green society, Cushon said.

Examples of projects that the fund managers will invest in include companies working towards creating a greener society, such as those pursuing innovations in alternative energy, and funding academic institutions that are developing tools and research to support social inequality reduction goals, such as Howard University.

As Cushon’s research shows that 62% of employees would engage more if they knew their pension was having a positive impact on climate change, both partnerships are integral to the master trust’s new investment strategy goals to further improve member engagement levels, and ultimately outcomes, by sustainably navigating investment risk as the world transitions to a net zero economy.

Roger Mattingly, chair of the Cushon Master Trust, said: “We’re looking forward to working closely with both Wellington and Lombard Odier to continue leading the pensions industry in reducing emissions to benefit both people and the planet – and improving members’ long-term risk-adjusted returns.”

James Bradbury, head of UK defined contribution (DC) at Wellington, added: “We believe our strength in impact and sustainable investing across asset classes makes us uniquely positioned to put Cushon’s members’ capital to work to address some of the world’s biggest social and environmental problems, whilst focusing on strong investment returns.”

Nathalia Barazal, co-head of Lombard Odier, believes the environmental transition is the industry’s “most pressing challenge”, but it also presents a significant investment opportunity.

“We are delighted to be working with Cushon to provide scalable opportunities to position capital into an environmentally-friendly economy, and help investors looking to benefit from the sustainability transition,” she said.

Cushon’s new strategy aims to increase the potential for greater investment returns by focusing on greener companies which are generally expected to perform better in the longer term – forecasts suggest that green investments will hit $1trn (€879.8bn) in 2023, up from $297bn in 2020, the master trust noted.

Its 200,000 members’ pensions will be invested in environmental projects such as the planting of new sustainable forests and in financing new wind and solar farms. It will reduce risk and enhance long-term returns by improving diversification across a portfolio of sustainable and responsible investments.

In addition to these impact bonds, the new investment strategy offers the largest master trust allocation to private markets (15%) and the first in the DC sector to deliver climate impact across 100% of the portfolio.

This allocation will be managed by Schroders Capital, Cushon, said, with focus on projects including sustainable infrastructure, clean tech, natural capital and climate insurance, as well as social and affordable housing.

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