July 16, 2019 / News

Welsh pension scheme to sell out of high carbon companies

By Joe McGrath, ESG Clarity

The City & County of Swansea Pension Scheme is the latest fund to avoid risks from high carbon businesses

Welsh pension scheme to sell out of high carbon companies

Swansea’s Local Government Pension Scheme has begun reducing the amount of cash it has invested in companies with a high carbon footprint.

The fund, which is one of Wales’ largest local government pension funds, started making the switch on 3 July and has promised by the end of this month it will have transitioned £0.5bn of assets into a low carbon index tracking fund.

This followed a programme of trustee training which the scheme says resulted in the adoption of the fund’s environmental, social and governance (ESG) policy, targeting a reduction in its carbon footprint.

Last year, the scheme commissioned a review of its equity investment portfolio to find out the extent of its carbon and fossil fuel-related investments.

Clive Lloyd, deputy leader of Swansea Council and chairman of the scheme’s pension fund committee, said: “The review showed that our investments in carbon-related industries were already 9 per cent below the pension industry average. But, over the coming years, it is important that the world reduces its reliance on fossil fuels and carbon-based products, so it’s important that our investments reflect that too.

“Since the review, the committee has been looking carefully at the potential impact on the fund of reducing its listed equity exposure to investments in fossil fuel companies by up to 50 per cent by 2022.”

Mr Lloyd added that the initial transition of £0.5bn would go “a considerable way to meeting our commitment”.

“As a committee we recognise the risk that climate change poses to society in general, as well as to the viability of pension funds like our own. But we also have to make sure that the return on our investments is enough to provide suitable pensions for our pensioners in the years to come,” he said.

The fund also “actively seeks” to invest in energy-efficient infrastructure projects and clean tech in other parts of its portfolio.

The City & County of Swansea Local Government Pension Scheme manages £2.1bn of funds for councils in Swansea and Neath Port Talbot, as well as a number of other employers in the area.

Over the past 10 years, Swansea Council has cut its carbon footprint by 30 per cent and on 27 June this year, a notice of motion aimed at declaring a climate emergency was agreed by full council.