People’s Pension shifts £15bn to EU Climate Transition Benchmark strategy

The People’s Pension, a UK defined contribution master trust, has shifted the developed markets equities allocation in its main investment fund to a strategy based on the EU’s Climate Transition Benchmark (CTB) label.

The assets in the accumulation fund of the scheme’s default arrangement – some £15bn – now follow regional MSCI Climate Change Indexes.

These provide for an immediate 30% reduction in financed emissions and further portfolio decarbonisation by 7% each year, as per the EU CTB methodology, plus divestment from companies that produce thermal coal within the assets covered by the new strategy.

The People’s Pension, which could hit £50bn in assets under management over the next five years, said the primary aim of its new approach was “to manage the long-term risks posed to members’ investments by climate change and a green transition, that aren’t currently being priced by the market”.

It also said it meant “members can be confident their investments are working toward the goals of the Paris Agreement”.

“We believe the changes we have announced mean that The People’s Pension is now one of the greenest master trusts in the UK, which is great news for our members,” said Dan Mikulskis, chief investment officer for People’s Partnership, which provides The People’s Pension.

Asked if The People’s Pension considered alternatives to the EU CTB methodology, such as the EU Paris-Aligned Benchmark (PAB) standard or carbon budget indices, a spokesperson for the master trust said it decided that using the CTB indices – versus PAB indices – was the most appropriate for the scheme. 

“The PAB indices essentially takes a blanket exclusion approach to the fossil fuel industry, which is not in alignment with our climate change investment beliefs and our soon to be published responsible investment policy,” he said. 

“It is important to note that the chosen CTB indices include an annual decarbonisation at 7%, which is in line with the IPCC 1.5°C scenario, with no or limited overshoot.”

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