The People’s Pension has more than halved the carbon footprint of its default fund over the past 12 months.
According to its latest annual TCFD report total carbon emissions within the scheme’s Global Investments Fund have reduced by 53 per cent. This portfolio is up to 85 per cent invested in equities.
This reduction comes as the scheme’s assets have grown by £8bn to £30bn over this period, with the master trust now running the retirement savings for 6.8m people.
In total the carbon emissions of the Fund have dropped by approximately 400,000 tonnes of CO2e – which is the equivalent of a reduction of 35.3 tonnes of CO2e per £1 million invested (35.3 tCO2e/£m).
This announcement comes almost eight months after the fund announced the move of £15 billion of its assets under management into climate aware investment strategies. The People’s Pension has said this allocation has since risen to £18 billion.
It had been anticipated that this allocation of funds would reduce carbon emissions of the relevant fund by at least 30 per cent, but the new TCFD data shows this reduction is significantly higher.
Following the change to the asset allocation, the report lists three sectors as being responsible for over 70 per cent of the remaining emissions of The People’s Pension’s growth assets: materials, utilities, and industrials.
The People’s Pension said between 40-60 per cent of the investee companies within these sectors have set science-based targets to reduce their emissions. Overall, the fund has seen an 8 per cent increase to 39 per cent invested in companies setting these targets.
The indices which guide the fund’s equity investments aim for a 7 per cent pa reduction in carbon footprint each year into the future, consistent with the Paris Agreement on Climate Change.
While updating the TCFD report the People’s Pension has added a new section on nature, as well as adding additional data drilling down into portfolios and sectors in order to position it as the scheme’s leading reporting document for Responsible Investment.
People’s Partnership, chief investment officer Dan Mikulskis says: “We are committed to doing what we can to make sure the companies we invest in follow certain standards particularly in material sectors and in our priority areas of Climate, Nature and Human Rights.”
“The TCFD report has become a useful reporting vehicle across a range of climate and Responsible Investment areas”.
“Portfolio changes are one pillar of our strategy here, the other being our stewardship approach which is driven by the scheme’s recently-published Responsible Investment Policy.”
The People’s Pension chair of the trustee board Mark Condron adds: “This report tells a compelling story about how we use our size and influence to ensure our members’ savings are allocated and managed responsibly and reinforces our commitment to tackling climate change through investing.”
The publication of the TCFD report follows the launch of The People’s Pension’s enhanced Ethical Fund. The new-look fund’s enhancements include adding significantly more exclusions, such as a blanket exclusion for fossil fuels, including the value chains of coal, oil, gas, and carbon-intensive power generation. Other new exclusions in the ethical fund include weapons, alcohol, tobacco, gambling, adult entertainment, unsustainable palm oil, recreational cannabis, and for-profit prisons.
The People’s Pension’s offering implements a strict decarbonisation target as the upgrades will cut the funds carbon intensity by at least 50 per cent, with the goal of further reducing it by 10 per cent per annum.