Merseyside Pension Fund launches a low carbon fund as a part of its Climate Risk Strategy

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Merseyside Pension Fund has confirmed that it has invested £400 million in a new All World Equity Climate Balanced Multi-Factor Index Sub-Fund. In November 2018, the Fund announced that it had selected a Smart-Sustainability Index from FTSE Russell, to support the implementation of its Climate Risk Strategy within the Fund’s listed equity portfolio. The fund is being managed on behalf of MPF by State Street Global Advisors (SSGA).
The objective of the Fund’s climate strategy is to align its Responsible Investment policy and activities with the goals of the 2015 Paris Agreement. As part of this, the Fund has considered options for capturing both the risks and opportunities arising from climate change. Merseyside Pension Fund is the fifth largest fund in the Local Government Pension Scheme (LGPS) with £9 billion of assets under management.
The index provides broad exposure to the target equity universe (FTSE All-World® Index) and is constructed using FTSE Russell’s innovative and transparent multi-factor weighting methodology. It tilts constituent weights to provide increased but balanced exposures to low volatility, momentum, quality, size and value factors. Alongside this it also incorporates climate change considerations through three parameters; carbon efficiency, fossil fuel reserves and the green revenues of constituents, using FTSE Russell’s Green Revenues data model.
Owen Thorne, Investment Manager, Merseyside Pension Fund said,“We are delighted to have completed the funding for our new All World Equity Climate Balanced Multi-Factor Index Sub-Fund, which has been seeded with £400 million [initial] investment. Working in collaboration with FTSE Russell and State Street Global Advisors, the new fund provides us with an investable, risk-efficient means of achieving our decarbonisation goals.”
Aled Jones, Head of Sustainable Investing, Europe, FTSE Russell said, “We are pleased that the Merseyside Pension Fund has selected FTSE Russell to help support its ambitious climate risk strategy. UK pension funds increasingly recognise the risks and opportunities arising from climate change and are implementing investment strategies to manage their exposure appropriately. The FTSE All-World Climate Balanced Comprehensive Factor Index provides a transparent means of integrating climate considerations into a passive equity portfolio and also aligns well with investor stewardship objectives”.
Ana Harris, Head of Equity Portfolio Strategies, State Street Global Advisors, said, “We are delighted to be offering our investment expertise to this strategy, working in partnership with the Merseyside Pension Fund to manage its new All World Equity Climate Balanced Multi-Factor Index Sub-Fund. The initial seeding successfully completed this month and the creation of this fund reflects the growing trend from asset owners to further integrate sustainable and ESG factors into their portfolios which we are thrilled to be managing.”