LGPS Central, one of the UK’s eight local government pension scheme (LGPS) asset poolers, has launched a Global Sustainable Equities Active Fund with four local authority partners funds investing at combined £1bn (€1.2bn).
The equities fund consists of three themed sub-funds covering broad, thematic and targeted funds that will be managed by Mirova, Liontrust Asset Management and Baillie Gifford, respectively, it was announced.
LGPS Central, which first launched the tender using the IPE Quest service last summer, said that asset managers were “selected on their merit and their alignment to fund themes”.
Scoring was based on an extensive range of metrics and qualitive information stretching across sustainable investing, financial performance, operational management and firm culture, it added.
The investment fund – which will see direct investment from the pension funds for Cheshire, Nottinghamshire, Shropshire and Worcestershire – will be benchmarked against the FTSE All World Index.
LGPS Central chief investment officer Gordon Ross, said: “This asset class was highlighted as a priority for partner funds following respective reviews of their investment strategies. The team here at LGPS Central then worked in collaboration with our partner funds to determine the mandates that formed the basis of the fund, aiming to reflect the varying risk and return targets required.”
He said that the pool continues to develop its product offering to provide “suitable choice” to its partner funds.
“In the spirit of pooling our aim is to offer high performing, cost effective investment vehicles in line with their varying strategies and this fund launch represents a very positive addition to our offer,” he added.
The aim of the fund is to bring together a suitable mix of diverse managers to invest in only the most sustainable businesses, with the expectation that it will deliver suitable return over the longer term as the world transitions to a lower carbon economy, LGPS Central said.
Myles Hogg, chair of the Cheshire Pension Fund, said: “The Cheshire Pension Fund has had a long-standing commitment to invest in sustainable companies; this is because we believe forward looking companies will play a major role in solving the world’s sustainability problems, and in doing so, generate strong financial returns for our members.”
He noted that this investment will enable the Cheshire scheme to make faster progress against its commitment to transition to net zero carbon emissions, across all of its investment portfolio.
“It will also accelerate our plans to decarbonise our equity portfolio, while at the same time protecting financial returns,” he added.
Eric Kerry, chair of the Nottinghamshire Pension Fund committee, said: “We’re ambitious for this fund and have earmarked an initial £320m to be used as part of its investments.”
He added that this commitment continues the scheme’s strategy to invest in sustainable companies with a long-term future.
Nottinghamshire Pension Fund actively looks for investments that can be expected to benefit as a result of the long-term impacts of climate change and other sustainability challenges, he said.
Thomas Biggins, chair of the Shropshire Pension Fund committee, said: “We know that climate change is an issue of increasing importance for our members and this new investment is yet another demonstration of our commitment to tackling the issue, in order to protect our investment portfolio from climate change risk.”
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