East Sussex statement on RI and fossil fuel exposure

April, 2022 Print

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The East Sussex Pension Fund (ESPF) published an update last month on its position on responsible investment and the fund’s exposure to fossil fuel.

The statement said ESPF continues to adjust its strategy and reporting in relation to climate and other environmental, social and governance (ESG) risks and reports quarterly on engagement activities.

Key themes in the statement included that ESPF has no exposure to fossil fuel companies within its equity portfolio, which accounts for 40% of the total fund strategy.

As of 31 December 2021, ESPF had invested £500 million into climate impact funds and became signatories to the Investor Agenda’s 2021 Global Investor Statement to governments on the Climate Crisis, to urge greater activity from governments in taking action against climate change.

ESPF makes no direct investment in any stock, but does so indirectly through a combination of holdings in passive index funds and pooled funds via active investment managers.

Divesting from single stocks in passive index funds can be expensive and can concentrate risk, so ESPF invests in two more specialist funds.

One is Storebrand, which explicitly excludes fossil fuels and companies with a large exposure through doing business with fossil fuel producers.

The strategy then favours high ESG and low carbon footprint scoring companies and the manager invests between 5% and 10% in stocks that are assisting the transition towards a low carbon economy.

UBS Asset Management is the second index manager, advised by Osmosis Investment Management and this strategy is also fossil fuel free.

It also excludes companies that generate more than 5% of revenue from nuclear energy, have association with nuclear weapons, controversial weapons, civilian firearms, tobacco, thermal coal and oil sands.

Businesses that are not compliant with the United Nations Global Compact principles are also excluded.

 

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