Strathclyde Pension Fund, which has £29bn of assets under management, is set to move £4bn to lower carbon transition indices to help meet its decarbonisation objectives.
According to a Glasgow City Council document, which is the administering authority for the Local Government Pension Scheme fund, Strathclyde will amend its passive equity mandate managed by Legal and General Investment Management (LGIMs) from 24% to 18% of total assets.
The new structure of the mandate will allocate 13.9%, which is equivalent to £4bn of the fund, to LGIM’s lower carbon transition index series and 4.1% to an alternative RAFI strategy.
This move aligns with Strahclyde’s Climate Action Plan to achieve net zero emissions across its portfolio by 2050, the fund said.
Overall, the fund it is reducing its equity allocation from 52.5% to 47% of total assets to increase its bonds holdings to 15% to “reduce investment risk”, the document explained.
Over the past 13 years, Strathclyde has been gradually decreasing its allocation to equity, which stood at 72.5% in 2011. However, from a net zero perspective, decarbonising bond holdings can prove difficult as it is based on the issuer’s climate objectives.
The documents also revealed that Strathclyde is removing a 2.5% allocation to emerging market debt whilst increasing its commitment to global infrastructure to 4.5% of the overall portfolio.
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