The Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC) has shifted all of its core passive equity holdings to a low carbon fund.
NILGOSC, which is the public body responsible for managing the £9.8bn (€11.72bn) local government pension scheme (LGPS) fund in Northern Ireland, transferred the £2.8bn of investments to the Legal & General Low Carbon Transition Fund in the first quarter of this year.
The fund tracks the Solactive L&G Low Carbon Transition Developed Market index, which aims to reduce carbon intensity by 70% relative to the starting universe at the outset, and to reach the goal of achieving net-zero carbon emissions by 2050.
The index’s universe covers all developed markets, but is slightly reduced by excluding companies that derive 30% of their revenue from thermal coal mining, and manufacturers of controversial weapons.
In a statement, NILGOSC also said that each holding within the remaining universe is assigned a climate score, based on three main indicators: emissions intensity; reserves intensity; and green revenues.
Using the overall climate scores, an adaptive tilt away from climate laggards and towards climate leaders is applied to capital allocation within the index, the LGPS fund said.
LGIM was the LGPS fund’s pre-existing passive manager.
David Murphy, NILGOSC chief executive officer, said the LGPS provider had been taking action to mitigate climate risk since 2008, but that until now its passive equity funds had tracked standard indices.
“The transfer has been made from those indices to the Low Carbon Transition Fund so that climate risk can be incorporated,” he said. “This move is an important part of our strategy to mitigate the risk of carbon in our portfolio and adds to a suite of other actions we have been taking to accelerate moves to a low carbon economy, both within our portfolio and the real-world economy.”
NILGOSC is a member of several responsible investment organisations and initiatives, including Climate Action 100+, the Institutional Investors Group on Climate Change and the Occupational Pensions Stewardship Council.
In 2021 it published its first report following the Task Force on Climate-related Financial Disclosures (TCFD) framework, with Murphy saying the fund expected TCFD-compliant reporting to be made a legislative requirement for all LGPS funds in the next 12 months.
“At that point we hope to be in a strong position to undertake the scenario analysis and target setting required,” he said.
In a statement, NILGOSC also said it was continuing to build up its infrastructure portfolio to a target of 7.5%, and that the portfolio currently held assets that were an important part of the emerging low-carbon economy.