$54bn UK master trust catches American cold over ESG policy
The People’s Pension, which manages $54bn in assets, has recently made its policy on responsible investing less ambitious following an ‘in-depth review’ (Dan Kitwood/Getty Images)
The second Trump administration has seen the world’s largest economy carry out several walkbacks on climate change.
In the investment space, some major US asset managers have pulled out of climate initiatives such as the Net Zero Asset Managers (though some have left their European subsidiaries enrolled).
One could argue this was a move to retain their European asset owner clientele, most of which place more emphasis on environmental, social and governance criteria. But the tide might be turning in that respect too.
The UK’s second largest master trust, the $54bn People’s Pension, has recently updated its approach to climate and scrapped its previous strategy: a top-down 1.5°C aligned portfolio. It now describes this as an “investment constraint”.
Instead, the People’s Pension will be taking on a bottom-up approach as to reflect differences across markets, asset classes and sectors. It will continue to implement a net zero ambition that is aligned with the Paris Agreement.
A People’s Pension spokesperson told AOX it reviews its policy every three years, with the latest review on climate being before Trump took office last year.
The new approach reads: “We do not adopt blanket divestment, notably in carbon-intensive sectors, which remain critical to the energy transition…Targeted exclusions or underweights may be used case-by-case,” potentially opening the door to the DC provider investing in carbon producing sectors and companies.
When asked what opportunities could result from this change, the spokesperson at the People’s Pension said it was undertaking an “in-depth review” on the impact of its update position on its investments.
As part of the change the master trust hired environmental consultant Canbury to conduct a literature review spanning supportive and challenging opinions. It also solicited views from leading academics in the field.
“The purpose of this [literature] review was to gain an understanding of a wide spectrum of industry and academic voices that could help inform this position paper and to ultimately attempt to mitigate against unconscious bias in our decision-making,” the policy reads.
The white paper concluded the People’s Pension’s previous approach to climate was a “more ambitious goal and [was] a specific, more rigorous form of a general ‘Paris-aligned’ strategy”.
Well, when America sneezes…