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Islington scheme to wind down carbon investment

The London Borough of Islington Pension Fund has agreed to reduce its investment in fossil fuels, following lobbying efforts from local environmental activist group Fossil Free Islington.

The £1.3bn scheme, which has 21,556 members and 6,669 pensioners, announced on September 12 that it is designing a four-year plan to lower carbon investment and build upon the progress it has already made in reducing its carbon footprint.

Environmental, social and governance factors are becoming increasingly difficult for trustees to ignore. Earlier this month the Department for Work and Pensions introduced new obligations for schemes to show how they address financially material risks in their investment strategies.

The Islington scheme has been working with investment adviser Mercer since late November to bolster its ESG credentials. While campaigners have influenced the scheme’s decisions, it remains set on viewing responsible investment issues through the prism of financial risk rather than ethics.

Islington council is made up of 47 Labour councillors and one Green Party councillor. The pension fund committee is entirely made up of Labour politicians.

The board met members of Fossil Free Islington, part of Fossil Free UK, which has local campaigns centred on several London boroughs and councils across the UK. The Islington Pensioners’ Forum also supported the move to divest.

The council has also engaged with the London Collective Investment Vehicle, the Institutional Investors Group on Climate Change and the Local Authority Pension Fund Forum on ESG.

The fund is now exploring investment opportunities in renewable energy and green infrastructure, but has ruled out any further changes to its investment strategy over the next 12 months.

No distinction between fiduciary duty and ESG

Amanda Burdge, principal investment consultant at Quantum Advisory, does not draw a line between a trustee’s fiduciary duties and the goal of reducing carbon investment.

“Today heavy polluters do not necessarily have a ‘carbon effect’ priced into their share price, but in a rapidly changing, uncertain and volatile world it is not too difficult to see the impact that any change in pricing could have on these polluters,” she said.

“Moving now to a lower-carbon approach could potentially reduce this risk for pension schemes and perhaps encourage change in even the heaviest of polluters who find themselves increasingly excluded from portfolios,” she added.


This piece first appeared on Pensions Expert in September 2018 – Continue to full article here