Merseyside Pension Fund takes further step towards 'decarbonisation' of investments

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Growing plantMerseyside Pension Fund has joined forces with global index, data and analytics provider, FTSE Russell, to develop a more sustainable and environmentally-equitable investment strategy.

The Fund has been reviewing its Responsible Investment policy in order to bring it into line with the goals set out in the 2015 Paris Agreement on climate change. It is now implementing the next part of its Climate Risk Strategy and moving towards ‘decarbonisation’, reducing its exposure to investments that are connected to climate change. The partnership with FTSE Russell will support the Fund along this path as it signs up to FTSE Russell’s new climate and multi-factor index, the FTSE All-World Climate Balanced Comprehensive Factor Index.

The new index will sit within FTSE Russell’s existing Smart Sustainability Index series and will provide investors with the ability to integrate key aspects of climate risk and opportunity alongside multi-factor or smart beta exposure.

The partnership was announced last week at the annual Pensions and Lifetime Savings Association Conference and Exhibition in Liverpool.

There is a growing trend among asset owners to integrate sustainability and environmental, social and governance (ESG) considerations into their investment strategies and stewardship approach. 

Sustainable investment benchmarks / indices also support transparency and disclosure in the capital markets by providing a signal to companies regarding their performance on a range of sustainability and ESG issues. 

Aled Jones, Head of Sustainable Investing, Europe, FTSE Russell said: “We are delighted to be working with Merseyside Pension Fund to support its ambitious climate risk strategy. Combining a multi-factor approach with a focused set of sustainability parameters is a new and exciting approach for the integration of sustainability and ESG considerations into passive investment strategies. 

“UK pension funds are actively engaging with companies on their ESG practices and the FTSE All-World Climate Balanced Comprehensive Factor Index will provide an additional powerful basis to increase corporate ESG transparency and performance”.

Owen Thorne, Investment Manager at Merseyside Pension Fund, added: “We are pleased to have worked with FTSE Russell to produce a low carbon index solution that provides us with an investable, risk-efficient means of achieving our decarbonisation goals”.