Summary of London CIV Investments (From London CIV website)
The Brent Pension Fund Sub-Committee last night decided to invite the
London CIV to its next meeting to discuss moves towards its Zero Carbon commitment.
The London CIV (Common Investment Vehicle) is a private limited company that
handles £11bn investments from 32 London borough pension funds including
Brent. The boroughs are shareholders in the London CIV as well as its
clients. There are some funds outside of the CIV held directly by the Brent
Local Government Pension Fund but the proportion is diminishing.
Therefore the emphasis must be on moving the CIV towards low and
net zero carbon investments. Last night Cllr McLennan reminded the
Committee that Brent has been instrumental in persuading the CIV to appoint a
sustainability officer. However the meeting recognised that the CIV's 2040
target for Net Zero carbon investments did not match Brent's own target
of 2030 and that it would not satisfy members of the public pushing for rapid
action in the face of the climate emergency.
The 'Roadmap' approved last night was a work in progress with much
research and discussion still to take place. The Brent Local Government Pension
Fund currently stands at £1,032m (20/21) compared with £835 the previous year.
The rise is attributed to the bounce back in economic activity after the worse period
of Covid. The fund received £61m in contributions, compared with £60m the
previous year. Readers will be aware from past articles on Wembley
Matters that the percentage contribution made by Brent employers is the highest
of our neighbouring boroughs and is especially noteworthy in the context of
school budgets where most employees (apart from teachers who have a separate
scheme) are members of the Fund.
The aim is to protect and maximise those pensions whilst also moving
away from fossil fuel and other investments that contribute to climate change.
Brent will invest another tranche of £30m into BlackRock Low Carbon Fund
a total 6% of its funds.
The officers' Roadmap concluded:
We have set out below some potential targets for further consideration.
The interim targets represent significant milestones towards the longer term
net zero target.
Review rationale for continuing with 5% UK equity allocation (10% of
overall equities). An outcome here could be to consolidate into global
strategies to bring UK allocation into line with its share of global markets
(5%).
Following on from the above, actions can be taken to increase allocation
to appropriate Paris aligned mandates (either active or passive depending on
outcome of belief exercise) capable of achieving carbon reduction targets. A shortlist
of options available to the Fund are shown below:
o Reduce carbon intensity as measured by Weighted Average Carbon
Intensity (WACI) by X% by 2030 versus 2021 base year
o Reduce total/potential emissions from fossil fuel reserves by X% by
2030 versus 2021 base year
o Invest at least X% of Fund’s portfolio in climate solutions (e.g.
renewable infrastructure, green bonds, companies with >90% revenues from
climate change activities) by 2030
o Percentage of portfolio with net zero targets to be at least X% by 2030
Growth structure (developed market equities)
Review rationale for continuing with 5% UK equity allocation (10% of
overall equities). An outcome here could be to consolidate into global
strategies to bring UK allocation into line with its share of global markets
(5%).
Following on from the above, actions can be taken to increase allocation
to appropriate Paris aligned mandates (either active or passive depending on
outcome of belief exercise) capable of achieving carbon reduction targets. A shortlist
of options available to the Fund are shown below:
·
·
o LCIV RBC Sustainable Equity Fund (active)
o LCIV RBS Sustainable Equity Exclusion Fund (active)
o LCIV Low Carbon Passive Equity Fund (to be launched)
o LCIV Paris Aligned Active Equity Fund (to be launched) LINK
o BlackRock ACS World Low Carbon Equity Tracker Fund
o LGIM Future World Range (a number of options within this)
After the meeting Simon Erskine of the Divest Brent group said:
In
the struggle to achieve Net Zero (i.e. carbon emissions created from transport,
power, agriculture etc. being balanced by carbon absorbed through growing
trees, direct air capture of CO2 etc.) companies need to play a key role in
reducing emissions from their activities. Switching investments from companies
responsible for large emissions to companies with low or negative emissions
encourages the transition to Net Zero.
One
of the biggest classes of investors is pension funds – for example Brent
Council’s Pension Fund owns investments in excess of £1 billion. For 5 years
Divest Brent has been campaigning for the Council to sell its investments in
(“divest from”) fossil fuel companies. Following the presentation to the
Council of a divestment petition with nearly 1,400 signatures the Council
agreed to draw up a roadmap to this goal.
On
5th October the Pension Fund Sub-committee considered the “Net
Zero Transition Roadmap”. It was acknowledged that the Roadmap was a start –
the Pension Fund needed to agree a target date for achieving Net Zero and then
draw up interim targets e.g. a 2030 Net Zero target with interim targets of 40%
emissions reductions by 2024 and 70% by 2027. The Paris Agreement of 2016 calls
for a maximum average global temperature increase of 2 degrees Centigrade
compared to pre-industrial levels, with a target of 1.5 degrees (compared to
the current increase of 1.1 degrees).
According
to the UN’s climate change scientific body, the IPCC, in a 2018 report, that
means Net Zero by 2050 with a 50% reduction in emissions by 2030. Since that
report was issued the pace of climate change has dramatically increased with
massive wildfires, record hurricanes and typhoons, lethal heatwaves, floods
(including flooding in Brent itself) and so on. Furthermore, in declaring a
Climate and Ecological Emergency in 2019, the Council agreed a Net Zero Target
of 2030. Councillors at the Pension Fund Sub-committee spoke out against the
Pension Fund adopting a 2050 Net Zero target and asked about the impact of a
2030 target – in line with the Council’s own position.
Officers
pointed out that the London Collective Investment Vehicle, which managed many
investments of London local authority pension funds, including much of Brent’s,
has adopted a 2040 date and suggested it may be appropriate for Brent’s Pension
Fund to follow suit.
We
welcome the Roadmap as a first step towards decarbonising the Brent Pension
Fund. Choosing a responsible Net Zero target date is crucial. Some people are
saying that the many extreme climate events, which are already responsible for
huge loss of life, homelessness and damage to property – along with species
disappearing at an alarming rate (around 50% over the last 50 years) –
demonstrate that we need to achieve Net Zero by 2025. The Council itself has
agreed on a 2030 target and in our view that should apply to the Pension Fund
too unless there is clear evidence that it would damage the Fund.”
Following
approval of the report the Council will now work hard evaluating the effect of
different targets, both for Net Zero and for interim emission reductions. These
will be considered at the next meeting of the Pension Fund Sub-committee in
February 2022.
Full Roadmap below. Click bottom right for full page version.
