Border to Coast, one of the UK’s eight local government pension scheme asset pools, is developing a standalone climate change policy to launch later this year, according to its responsible investment and stewardship report.
It said the move was “in response to the heightened focus in this key strategic risk area”, citing the UN climate change summit in November and net-zero initiatives aimed at asset managers and asset owners.
In a separate Task Force on Climate-related Financial Disclosures (TCFD) report, it said introducing carbon reduction targets for investment portfolios “remains actively under review with our partner funds to be able to support any net-zero commitments made”.
The pool has set up a project group with six workstreams to support the work to deliver its planned climate change policy. It also suggested that it would next year be in a position to carry out scenario analysis on its investment portfolios.
For the 2020/21 period, Border to Coast reported decreases in all carbon metrics, both in absolute terms and relative to the benchmarks, in its listed equity funds and investment grade credit fund.
It does not carry out carbon footprinting of its index-linked bonds and private markets portfolios, and also noted that carbon data coverage for fixed income markets generally is less mature, “and a systemic issue which the market is yet to address”.
DB trustees struggling to reflect ESG beliefs in investment strategies
Only 40% of UK defined benefit (DB) trustees believe their pension scheme’s ESG policy reflects their preferred approach to ESG and sustainable investments, XPS Pensions Group has said.
The consultancy surveyed more than 200 trustees across 80 pension schemes and said it found that nearly all (94%) agreed about the importance of ESG investment principles, many found it difficult to implement them.
Other findings include that 85% of respondents think it is important to communicate their scheme’s responsible investment strategy to members, but only 46% agreed that members’ views should be considered when agreeing the investment strategy.
XPS said that to help resolve the “gap between intention and action”, trustees should focus on action such as the development of a UK-specific equivalent of the EU sustainable finance disclosure regulation to help identify funds that incorporate ESG risk management and sustainability issues into decision-making.
Simeon Willis, chief investment officer at XPS Pensions Group, said: “We are in the midst of a significant change of direction in the industry. This survey clearly demonstrates that ESG has rightly gained trustee support and buy in – but there is still a lot of work to do from here.
”We need clearer terminology, better information and more choice to facilitate investment in sustainable products by schemes.
BlackRock launches active fixed income impact fund
BlackRock has added what is describing as an impact fund to its emerging markets active fixed income range.
The strategy is its first active fixed income impact fund and one of the first of its kind on the market, the asset manager said.
It invests at least 80% of its total assets in green, social and sustainability bonds issued by sovereigns and corporates operating in emerging markets; the portfolio comprises around 50-60 issuers offering daily liquidity.
The proceeds of the bonds must be fully tied to green and social impact projects.
“While emerging market bonds are already a strategic asset class for investors, there is a growing consensus that focused green and social funding can play an important role in closing the gap to the targets laid out in the UN Sustainable Development Goals,” said Rich Kushel, head of BlackRock’s portfolio management group.
Amundi earlier this year launched an open-ended emerging markets green bond fund, following on from the close of its pension fund-backed Amundi Planet Emerging Green One fund in 2018.