ERAFP, the €16bn French public sector pension fund, is to lower the carbon output of a €750m equity portfolio by more than one-third.
The scheme – a signatory to the Montreal Carbon Pledge together with PGGM, the UK’s Environment Agency Pension Fund and AP4 – said it would be working with French manager Amundi to lower the carbon intensity of one of its portfolios by 40%.
It said the portfolio’s index would employ a ‘best in class’ approach, additionally excluding the 5% of companies deemed most polluting and the bottom 20% of companies in each sector.
“While monitoring this mandate closely, ERAFP will continue its work on measuring carbon and climate risks with a particular focus on supporting research and development initiatives aimed at assessing the alignment of investments with climate objectives,” the fund added in a statement.
Julian Poulter, executive director of the Asset Owners Disclosure Project, said the main argument for reducing the carbon footprint was not about morals or ethics but financial risk.
Philippe Desfossés, chief executive at ERAFP, added: “It is hard to dispute that carbon is a risk. So how can we fulfil our duty of trust if we don’t implement the systems necessary to assess this risk to reduce it? And worse still, having measured the risk, we don’t disclose it to stakeholders?”
The Montreal Carbon Pledge hopes to attract institutions worth $3trn to the initiative in time for the Paris climate change talks.
Swedish buffer fund AP4 and France’s Fonds de Réserve pour les Retraites previously committed €1bn each to low-carbon indices designed with Amundi.
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