TPT Retirement Solutions, a UK-based workplace pension scheme, has invested in the newly-launched low carbon fund range by Legal & General Investment Management (LGIM).
LGIM’s new climate-tilted index equity strategy “seeks to significantly reduce its exposure to carbon emissions in alignment with 2050 net-zero goals,” it said.
Cliff Speed, chief investment officer at TPT, said: “Climate change is one of the biggest risks facing our portfolios, and addressing this is vitally important to TPT as we try to reduce the risk of being invested in stranded assets.”
He added that the scheme’s partnership with LGIM will enable TPT to meet its objectives of reducing its portfolios’ carbon exposure in a way that is aligned with its climate change policy and “helps meet our regulatory commitments.”
The LGIM Low Carbon Transition Index Equity Fund range leverages LGIM’s climate scoring framework and will reduce initial exposure to carbon-emitting assets by 70% compared to the broad market capitalisation benchmark, the manager disclosed.
The funds will also have significantly lower exposure to fossil fuel reserves and higher exposure to companies with green revenues, it said.
The aim of LGIM’s new strategy is to achieve further reductions in exposure to carbon emissions over time. This will be delivered through a suite of funds that will invest in listed equity assets, excluding coal and controversial weapons and aligned with the firm’s Climate Impact Pledge.
Stefan Jean-Luc Bilby, senior index distribution manager at LGIM, said: “Addressing climate-related concerns is of paramount importance to our clients given growing regulatory pressures and the global shift towards net zero.”
He said the new fund range will offer investors ”an effective means to mitigate their climate risks using an innovative index approach”.
Investment consultant LCP assisted LGIM on the design of the new strategy.
Claire Jones, head of responsible investment at LCP, said LGIM’s new fund range will enable pension schemes not only to manage their climate risk exposure by investing in low-cost equity funds that combine a large reduction in carbon intensity on day one, but also to reduce that intensity further over time.
Serving over 2,600 organisations and more than 389,000 members, TPT is run as a not-for-profit organisation for the benefit of its members and has assets of more than £13bn (€15bn). TPT’s investment size into LGIM’s strategy was not disclosed.