Reduce to increase

“Highly innovative with a unique natural capital asset class and a strong climate change focus,” judge’s comment

Country

United Kingdom

Type

Defined benefit

Members

12,962 active
8,082 retired
8,410 deferred

AUM

€5,615m

Performance

8% (1yr)
2.8% (3yr)
4.9% (5yr)

growth assets 31 March 2024) 

The Environment Agency Pension Fund (EAPF) is an open defined benefit pension scheme for environmental regulators in England and Wales. Its commitment to ground-breaking, sustainably focused portfolios across all asset classes has delivered strong financial returns and contributed to its being a fully funded scheme for the past eight years running.

EAPF has recently created a completely new asset class, natural capital, with a 4% strategic asset exposure. This links its approach to tackling climate change with tackling biodiversity loss, since from an investor risk perspective, according to the fund, one cannot be addressed without considering the other. When investing, EAPF looks for a baseline scientific assessment and reporting of biodiversity metrics to understand its impact. One recent investment is a project in Paraguay to convert degraded grazing land into a sustainably managed forest, with a guaranteed 25% minimum set aside for natural regeneration. Around 60m trees should capture 18m tonnes of CO2, while 27 endangered species are being protected. It expects the project to create 33,000 jobs.

Reducing its portfolio carbon emissions helps EAPF to manage financial risks from climate change. It plans to reach net zero by 2045 and it is already five years ahead of this in terms of emissions reductions.

EAPF’s largest asset class is listed equities, which accounts for 40% of overall assets. Within this portfolio, it reduced absolute Scope 1 and 2 emissions by 74% between 2010 and 2020. It aims to reduce this further by 87% by 2025 and 95% by 2030 compared with 2010.

Further aims include always holding at least 33% of investments in sustainable assets, investing significantly in green solutions and building a clean, biodiverse and climate resilient future. By 2025, it plans to have 17% of investments directly tackling climate change. It will also use shareholder power to drive change in companies it invests in.

STRATEGIC TAKEAWAYS

➤ Strong financial returns contributing to fully funded status for eight years running

➤ Creation of a new asset class linking climate change solutions with tackling biodiversity loss

➤ Aim of always holding at least 33% of investments in sustainable assets

HIGHLY COMMENDED

Country 

United Kingdom

AUM

€35,400m

Performance

-2.48% (1yr);
4.15% (3yr)
3.71% (5yr)
4.33 (10yr)

Greater Manchester Pension Fund (GMPF) has achieved excellent investment results relative to its benchmark and boasts achievements through local impact investing. At December 2022, GMPF had committed 4.5 % of assets or £1.36bn (€1.63bn) to local investments, creating 7,600 jobs. It has also contributed to 4,400 new homes. GMPF has also pioneered direct infrastructure investment in the UK, founding GLIL, a collaboration with like-minded investors, which has invested over £3.1bn into UK infrastructure assets, covering rail, digital infrastructure and renewable energy.

Country 

United Kingdom

AUM

€33,520m

Performance

8.50% (1yr)
4.80% (3yr)
7.40% (5yr)
8.10% (10yr)

Strathclyde Pension Fund – the scheme for public sector employees in western Scotland – enjoyed unprecedented results from its latest actuarial valuation, with its highest ever funding level (147%) and biggest ever surplus of £8.9bn (€10.7bn). Created in 2009, its direct impact portfolio boasts £2bn-worth of UK commitments, spanning renewable energy infrastructure, housing, venture and growth capital. The total return since inception has been 7.6% p.a. Recent investments include a £15m solar portfolio co-investment, and a £25m allocation to a new northern UK technology fund.

Judged by

Maria Mercè Claramunt Bielsa
Ian Coleman
Raj Mody
Richard Campbell