In a major announcement for a UK retirement scheme, Wiltshire Pension Fund (WPF) confirmed that it plans to divest from fossil fuels by 2030.
“We have set a target to achieve net-zero carbon emissions across all our investment portfolios by 2050, and this plan is one part of how we aim to achieve this goal,” the £3.1bn Local Government Pension Scheme (LGPS) fund said.
“As a long-term investor, WPF’s goal is to protect the investments from climate change risk, and safeguard the financial future of the fund,” the pension fund explained. It also stressed that its supports a global warming scenario of “well below 2°C”.
WPF does not see a long-term place for fossil fuel investments in its portfolios, and will work towards being fully divested from these companies by 2030, it said.
“In the short term we will continue to monitor our holdings in these companies, to ensure that any such investments are helping to finance real-world change.
“Alongside this, we will continue to invest in renewable infrastructure and climate solutions, to help create sustainable replacements for traditional fuel sources, and contribute positively towards ensuring energy security,” the fund explained.
WPF said this approach aims to ensure that the fund’s risk of exposure to stranded assets is well managed, and that it can benefit from the investment opportunities presented by the transition to a low carbon economy.
The total value of the fund’s holdings in fossil fuel firms amounts to just under 1% of its entire investment portfolio.
“Our investments are held in pooled investment vehicles, alongside other investors.
“There is a risk that these [pooled investment] arrangements may impose certain limitations on the implementation of our divestment policy, as individual investors such as WPF may not be able to request the sale of specific stocks,” the local authority pension fund added.
Nevertheless, “we have communicated our stance to Brunel Pension Partnership [WPF’s asset pool] and other investment managers, and we are actively collaborating to navigate these challenges and progress toward our sustainability objectives,” WPF concluded.
The decision to divest comes only weeks after Net Zero Investor (Room151’s sister title) reported that WPF is at odds with Brunel over its investment in fossil fuel companies, which have contributed to an increase in the funds’ carbon emissions.
WPF acknowledged in its latest Climate Report that the fund is currently “behind target”, adding that it “does not expect that our decarbonisation journey will be completely smooth”.
The portfolios with the largest carbon intensity are not managed by Brunel but by Wiltshire Pension Fund, although the largest percentage intensity increase in the reported period was for Global High Alpha, which is managed by Brunel.
The portfolio has a target of reducing its emissions by 50%, based on a 2019 baseline, by 2030, which is consistent with a 7% year-on-year reduction.
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