The £35bn (€40bn) British Telecom Pension Scheme (BTPS) is to put £100m into a new carbon efficient tracker fund developed for it by Legal & General Investment Management with the aid of FTSE Group and Trucost.
LGIM, the asset manager with £356bn in assets under management, said the new UK Equity Carbon Optimised Index Fund uses a custom index from FTSE and is based on carbon data provided by environmental analysis firm Trucost.
“Alongside our partners of LGIM, Trucost and FTSE, the BT Pension Scheme is pleased to invest in this attractive, institutional-focused product,” said Helene Winch, Head of Policy at BT Pension Scheme Management.
She added the fund has been looking at ways to efficiently allocate capital to investments that could outperform in times of higher carbon prices.
LGIM said it has worked closely with the BTPS to develop a fund which meets its requirements. BTPS, the largest private pension fund in the UK, has an existing relationship with LGIM, which manages itsmulti-billion-pound passive equities portfolio.
“Although this fund has been developed for BTPS we are confident that the concerns that caused them to ask us to develop this fund will be shared by other pensions investors who will also invest in this fund to reduce carbon exposure risk,” said Mike Craston, Managing Director of Institutional Business at LGIM.
The new fund will direct investment towards carbon-efficient companies and reduce fund exposure to rising carbon costs. Craston said it’s expected that passive investors will be drawn to the index due to its lower carbon risk combined with a fund designed to deliver very low tracking error, compared to its benchmark.
The fund aims to achieve returns close to the FTSE All-Share index while reducing exposure to financial risk from the transition to a low carbon economy and rising energy costs.
The BTPS is an active member of the UN Principles for Responsible Investment, which LGIM signed up to in September last year, and the Institutional Investors Group on Climate Change.