Wiltshire Pension Fund remains “agile” on decarbonisation target-setting, the head of the £3.1bn (€3.6bn) local government pension scheme has said.
The pension fund has a net zero by 2050 target, which it has broken down into various commitments. These include a whole fund carbon reduction target of 50% by 2030 and a commitment to a listed equities carbon reduction target of 43% by 2025.
Its carbon footprint for listed equities is down 23.3% since the end of December 2019.
In its third annual report following the guidelines set out by the Task Force for Climate-related Financial Disclosures (TCFD), the pension fund said it was currently slightly behind target but that it expects that “progress will not be a smooth journey”.
Jennifer Devine, head of the local authority pension fund, told IPE it was continuing to target the 43% by 2025 goal by engaging with the high emitters in its portfolio, “but we are also approaching net zero by 2050 in a broader way – a lot of our investments will be delivering real-world change that will help us earn superior risk-adjusted returns by investing in assets that will help the transition to net zero”.
“That said – specifically on the target setting, we remain agile and will revisit how we can get there next year when we will re-run our climate scenario modelling.”
Wiltshire’s net zero by 2050 target was set following modelling work done in 2020 by Mercer and Hymans Robertson, the pension fund’s consultants and actuary, respectively.
The modelling also led the pension fund to establish dedicated strategic allocations to sustainable equities, and climate solutions and renewable infrastructure.
The latter is a 7% allocation that Wiltshire will be implementing through a multi-asset Climate Opportunities (Clops) portfolio. The pension fund has already made a £100m commitment to invest in renewable energy assets across the southwest of England, and is working with its advisers to implement the rest of the portfolio.
Brunel and heavy emitters
According to Wiltshire, MEG Energy, an oil sands producer, entered the pension fund’s global high alpha portfolio in 2023, contributing to significant increase in the portfolio’s carbon intensity.
In its TCFD report, the pension fund said it had asked Brunel Pension Partnership, which administers more than 70% of the pension fund’s assets, to sell the MEG holding as it was not satisfied with the investment case.
According to the report, Wiltshire also challenged the investment rationale for a holding in Suncor Energy, with Royal London Asset Management, the underlying asset manager of the Brunel portfolio, deciding to sell the holding.
Overall, the pension fund said it does not see a long-term place for fossil fuel investments in its portfolios, “and will work towards being fully divested from these companies by 2030”.
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