The Avon Pension Fund has joined a south-west partnership committing £50m to renewable energy and transition assets in the region.
In its annual responsible investment report, the scheme said it is committing to a 3% allocation, or £160m, of total fund assets to local impact portfolio building on the fund’s existing “impactful” investments which include renewable infrastructure, affordable housing, and listed exposure to sustainable and transition aligned equities.
The Avon scheme made its first local impact commitment to a Shroders Greencoat managed fund, Wessex Gardens, in October 2023 along with five other underlying Brunel Pension Partnership partner funds, of which Avon is also a partner in.
Aggregate commitments totalled £330m, with Avon Pension Fund committing £50m. The mandate will make long-term investments in renewable infrastructure and energy transition assets across the South West of England, the fund’s report revealed.
The Avon Pension Fund detailed that investments include a wide range of renewable energy technologies, including traditional sectors of solar PV and wind, and innovative energy transition sub-sectors such as battery storage and green hydrogen production.
It added that a large amount of capital is being deployed into a concentrated geography, and the investments are expected to deliver significant local impact across the region, creating jobs in the South West while providing clean energy to the national grid.
It said that the partnership represents the largest-ever commitment by UK local government pensions into place-based and locally-focused renewable energy infrastructure.
The investments will not only contribute to meeting the UK’s net zero and energy security targets, but also the net zero targets and environmental impact goals of the fund.
Paul Crossley, chair of Avon Pension Fund committee, said that the agreement to allocate £160m to “local impact investments spanning renewables, affordable housing and funding for small businesses will see the fund well placed to quantify the contribution it makes to pressing social and environmental issues”.
Crossley said that over the coming year, the fund will focus on its priority ESG themes and take the necessary action to accelerate progress towards the fund’s net zero goal by looking at allocations to nature-based solutions such as forestry and sustainable agriculture as well as continuing to advocate for a supportive policy environment that will facilitate change ultimately for the benefit of its members.
Net zero
The fund has also adopted a new set of climate targets and a 2045 net zero goal across the whole fund.
It said that in order to help it achieve its goal, by 2030 the fund will divest from all developed market equity holdings in high impact sectors that are not achieving net zero or aligning to achieve net zero by 2050.
it will also reduce the carbon intensity of its listed equity portfolios by 43% and 69% by 2025 and 2030, respectively, and by 2030 the fund will also reduce the carbon intensity of its corporate portfolio by 60%.
In addition, the fund will ensure that 70% of financed emissions in material sectors are covered by active engagement by the end of 2024 and 90% by 2027.
Crossley said: “We have made material progress against the interim climate targets we set in 2019/20, enabling the fund to increase its level of ambition this year by formally adopting a 2045 net zero target underpinned by credible medium-term targets, including a commitment to divest from high impact companies if they cannot evidence a credible alignment strategy before 2030.”
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