The £9 billion Merseyside Pension Fund has invested £400 million in an index-tracking fund, with adaptions for climate change risks and risk factor exposures.
The LGPS fund will use a smart sustainability index from FTSE Russell for the All World Equity Climate Balanced Multi-Factor Index subfund, which will be managed by State Street Global Advisors. The index used will support Merseyside’s responsible investment policy, aligning it with the 2015 Paris Agreement. It will also give broad exposure to global equities using a multi-factor weighting approach. This aims to give balanced exposures to equity risk factors such as low volatility, momentum, quality, size and value.
Merseyside Pension Fund investment manager, Owen Thorne, commented: “Working in collaboration with FTSE Russell and State Street Global Advisors, the new fund provides us with an investable, risk-efficient means of achieving our decarbonisation goals.” And FTSE Russell head of sustainable investing, Europe, Aled Jones, said: “UK pension funds increasingly recognise the risks and opportunities arising from climate change and are implementing investment strategies to manage their exposure appropriately. The FTSE All-World Climate Balanced Comprehensive Factor Index provides a transparent means of integrating climate considerations into a passive equity portfolio and also aligns well with investor stewardship objectives.”