A £ 2.6 billion public sector pension fund will channel more of its assets into green investments and reach a “net zero” position by 2037.
The city councilors, who oversee the Swansea City and County pension fund, made the decision on the advice of officials and financial experts.
Net zero means that the pension fund as a whole would not contribute to climate change.
Cllr Clive Lloyd, chairman of the pension fund committee, said the move was “groundbreaking”.
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The fund has already reduced its carbon investments in stocks by 58%, but a council report said its remaining investments and holdings still imply a temperature rise of around 3.5 ° C.
This implied increase is a calculation that converts a company’s or fund’s current and projected greenhouse gas emissions into an estimated increase in global temperature.
The fund managers will now try to reduce the implicit temperature increase to 1.5 ° C by 2030 with a series of measures.
This includes investing more money in investments that will support the transition to a green economy and reducing its fossil fuel share from its current 9% to zero.
There will also be more exposure to companies the fund invests in and increased monitoring of the fund to review how the measures have worked.
An obligation to finance tree planting projects and sustainable agriculture is also being examined.
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A representative of the pension fund’s advisors, Hymans Robertson, told the committee that the net-zero strategy would put the fund “at the forefront of what pension systems and other people in general do”.
He said the targets are achievable, but there will come a point where a “trade-off” between investment returns and the low-carbon approach to investing will be required.
Cllr Lloyd said the committee was reluctant to risk its overarching fiduciary duty to the fund’s thousands of members.
He said the committee would be “well warned” in advance of any risk to financial returns.
The pension fund covers the councils of Swansea and Neath Port Talbot, as well as other public sector employers, and has just over 20,000 paying contributors and 13,600 retirees.
Its value rose from £ 1.98 billion at the end of March 2020 to £ 2.61 billion a year later.
Speaking at a meeting in September, Jeff Dong, the council’s deputy chief financial officer, said, “The returns the funds have made this year are basically pretty amazing”.
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