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Environment Agency Pension Fund announces sweeping climate policy update

Leading UK fund to cut exposure to coal reserves by 90%

The Environment Agency Pension Fund has announced that it will reduce its exposure to coal reserves by 90% and oil and gas reserves by 50% over the next five years, and invest 15% of its fund in low carbon, energy efficient and other climate mitigation opportunities.

To mark Good Money Week, and ahead of the UN climate talks in Paris, the fund has published a policy to address the impacts of climate change, to give its members a credible plan on its approach to the risks and opportunities that could arise as a result of climate change.

It has set itself an objective to ensure that its fund’s investment portfolio and processes are compatible with keeping the global average temperature increase to remain below 2 degrees.

To achieve this the fund has set itself three targets for 2020. It will invest 15% of its fund in low carbon, energy efficient and other climate mitigation opportunities.

It will also decarbonise its equity portfolio by reducing its exposure to fossil fuel reserves by 90% for coal and 50% for oil and gas.Finally, the Environment Agency Pension Fund will support progress towards an orderly transition to a low carbon economy through actively working with asset owners, fund managers, companies, academia, policy makers and others in the investment industry.

The fund’s current exposure to fossil fuels is roughly 2.5% of the fund.

It recently moved its index global equities to be run against the new MSCI Low Carbon Target World Index. The amount involved is around £280m, over 10% of the fund.

Elsewhere, ESG research house EIRIS has estimated that the amount of money invested in the UK’s green and ethical retail funds reached over £15bn in 2015 – up from approximately £6bn 10 years ago. The estimate came ahead of Good Money Week (18 – 24 October 2015) and EIRIS’s Deputy CEO Stephen Hine said: “With continued consumer interest in global issues like climate change, human rights and equality, it is not surprising that consumers are keen to explore responsible finance.” Good Money Week is a UK-wide campaign run by the UK Sustainable Investment and Finance Association (UKSIF).

Mark Mansley, Chief Investment Officer, Environment Agency Pension Fund is speaking at RI’s ESG 2.0 conference in London on Thursday 19th November link