Swansea Pension Fund Begins £500 Million Switch to Low Carbon Index

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One of Wales’ biggest local government pension funds has started to reduce its carbon footprint by cutting the amount of cash invested in companies with high carbon intensity.

The City & County of Swansea Local Government Pension Scheme manages £2.1bn of funds for councils in Swansea and Neath Port Talbot as well as a number of other employers in the area.

Now the fund has started to reduce further its already low level of investments in carbon-related industries.

By the end of this month (note: July 2019) they will have transitioned £0.5bn of assets into a low carbon index tracking fund after a programme of trustee training which resulted in the adoption of the fund’s Environmental, Social, Governance (ESG) Policy which targeted a reduction in its carbon footprint.

Clive Lloyd, deputy leader of Swansea Council and chair of the scheme’s pension fund committee, said:

“Like many other pension funds, we think carefully about how the investments we manage for thousands of existing contributors and pensioners are able to maximise the required returns, whilst also being mindful of our responsibilities to the environment and future generations.

“That’s why last year we were the first local government pension scheme in Wales – and among only a small number in the world – to commission a review of our equity investment portfolio to find out the exact extent of our carbon and fossil fuel related investments.

“The review showed that our investments in carbon-related industries were already 9% below the pension industry average. But, over the coming years, it is important that the world reduces its reliance on fossil fuels and carbon-based products, so it’s important that our investments reflect that too.

“Since the review, the committee has been looking carefully at the potential impact on the fund of reducing its listed equity exposure to investments in fossil fuel companies by up to 50% by 2022.

“This initial transition of £0.5bn – which started on July 3 – will  go a considerable way to meeting our commitment.

“As a committee we recognise the risk that climate change poses to society in general as well as to the viability of pension funds like our own. But we also have to make sure that the return on our investments is enough to provide suitable pensions for our pensioners in the years to come.

“As a very long-term investor we also need to ensure the money we manage and invest on behalf of our members balances the need for a sufficient investment return while at the same time reducing our exposure to carbon and fossil fuel-producing firms as we make the transition to a low carbon economy.”

The carbon reduction decision was made with reference to the ESG policy. An update on the initiative will be given to a meeting of the committee this Thursday (note: July 11).

Alongside its carbon reduction programme in its listed equity portfolio, the fund also actively seeks to invest in energy-efficient infrastructure projects (renewables, solar, alternative fuels) and clean tech in other parts of its portfolio, always seeking to optimise its return, whilst having a positive environmental impact.

Swansea Council is setting out to become one of the most energy-efficient local authorities in Wales.

Over the last decade the council has slashed its carbon footprint by 30%, but has plans to go even further over the coming years.

A notice of motion aimed at declaring a Climate Emergency was agreed by full council on June 27. It calls on the city as a whole to play its part in tackling the challenges of climate change.

The council has set an example with recent initiatives including creating the biggest electric vehicle fleet of any local authority in Wales, spending more than £6m introducing LED street lighting and retro-fitting hundreds of council homes with energy-efficient boilers and kitchens.

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