UK pension funds join forces in EM climate transition initiative

A group of 12 leading UK pension funds, convened by the Church of England Pensions Board (CEPB), has come together to jointly consider how to support a low-carbon energy transition in emerging markets.

In addition to CEPB, the group* includes three local government pension scheme asset pools, the two largest UK private pension schemes – BT Pension Fund and Universities Superannuation Scheme – NEST, Railpen, and West Yorkshire Pension Fund.

In a statement, the pension funds said they were committed to working together, in line with their fiduciary responsibility, to consider how they might scale investments in support of the climate transition in emerging economies.

“Whilst we can invest individually, and a number of us already do, we are keen to explore if greater impact and scale of commitments can be achieved by developing a shared understanding of the need, opportunity and mechanisms to provide such finance,” they said.

They said they were committed to working with the UK COP26 presidency and international financial institutions “to consider the most practical and effective way to target and scale the funding that could be provided from UK pension funds, either through individual commitments or the creation of a joint commitment in line with our respective investment strategies”.

The funds outlined their intentions at the opening of a conference in London today, the ‘Net Zero Delivery Summit’. The collaboration was agreed following an investor roundtable, chaired by Adam Matthews, chief responsible investment officer at CEPB, with the UK pensions minister.

The group is aiming to be in a position to outline next steps by COP27 in Egypt later this year.

“This initiative will be key to our understanding and our approach as well as identifying the support we require from the UK government to work constructively with our peers to achieve real world emissions reductions”

Clive Mather, chair of the Church of England Pensions Board

CEPB’s Matthews said the group’s formation was “a signal of genuine intent to work collaboratively and with purpose to evolve a common approach and deliver on it”.

“We can see the need in countries such as South Africa, where you have clear governmental commitments and public funding on the table but a need for further transition finance that could be met by pension funds investment in such economies,” he said.

Clive Mather, chair of CEPB, said: “We are clear that the level of investment required in emerging markets will only be achieved if we can increase ambition and work with other investors.

“This initiative will be key to our understanding and our approach as well as identifying the support we require from the UK government to work constructively with our peers to achieve real world emissions reductions.”

The initiative chimes somewhat with efforts by the Net-Zero Asset Owner Alliance to promote blended finance as a way to help mobilise more private capital for climate finance in emerging markets.

In the Netherlands, meanwhile, fiduciary manager Van Lanschot Kempen has developed a new sustainable emerging markets index for its pension fund clients that excludes 30-40% of constituents, including Brazil.

*The members of the group are: Border to Coast Pensions Partnership; Brunel Pension Partnership; BT Pension Fund; Church of England Pensions Board; Environment Agency Pension Fund; NEST; Northern LGPS: Legal and General Mastertrust; Legal & General Workplace Pension Plan and Stakeholder Pension Plan; Railpen; Universities’ Superannuation Scheme Ltd; and West Yorkshire Pension Fund.

They have roughly £400bn in assets under management between them.

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