ESG spotlight: A roundup of the latest news on environmental, social and governance initiatives, with Wales Pension Partnership and Willis Towers Watson reducing their carbon emissions, and new research from PGIM that shows almost half of investors are overlooking climate risks.
Wales Pension Partnership implements new decarbonisation initiative
Wales Pension Partnership, the pooling entity for the eight Welsh Local Government Pension Scheme funds, has implemented a new decarbonisation initiative across £2.5bn of its global equity assets managed by Russell Investments. This will see the WPP’s global equity mandate achieve a targeted reduction in both its carbon footprint and fossil fuel reserves exposure by 25 per cent relative to its benchmark — the MSCI All Country World Index. The company has stated that the portfolio will also exclude companies that rely on coal to generate revenues. WPP is utilising Russell Investments’ enhanced portfolio implementation infrastructure to achieve its decarbonisation targets. EPI leverages a centralised trading and portfolio management process, with Russell Investments responsible for executing the investment strategies of the WPP’s underlying fund managers, it stated.
Willis Towers Watson Investment targets net-zero greenhouse gas emissions by 2050
Willis Towers Watson Investments announced on Thursday that it is targeting net-zero greenhouse gas emissions by 2050 at the latest, with at least a 50 per cent reduction by 2030 in its fully discretionary delegated investment portfolios. The company, which currently holds £166bn in assets under management globally, believes doing this will significantly improve risk-adjusted returns for its clients. The reduction will come from two sources — ‘better beta’, due to more effective stewardship, and ‘alpha’ as the mispricing of climate issues is resolved. Furthermore, WTW stated that understanding the transition will be one of the biggest sources of alpha across all asset classes, and the alpha opportunity is likely to be the greatest in the next few years. In the meantime, the company will continue to work with its advisory clients to set out and deliver on their own climate-related goals via carbon journey plans, including analytics on how climate change might impact liabilities as well as assets.
PGIM: Almost half of global investors overlooking climate change risks
While global investors are almost unanimous in acknowledging escalating climate change risks, more than 40 per cent of these take no action to combat this threat within their investment processes, research from PGIM showed. The survey, in which Greenwich Associates interviewed 101 institutional investors with more than $3bn (£2.2bn) in assets across North America, Europe and Asia-Pacific, also concluded that while 89 per cent of global investors revealed climate change was an important issue for their organisation, only 58 per cent had taken steps to formally incorporate it into investment processes. However, PGIM stated that there was a clear regional gap in relation to investor climate change thinking and action. When asked if climate change was a meaningful factor in asset allocation decision-making, 85 per cent of European investors said it was significant, against 57 per cent in Asia-Pacific and just 25 per cent in the US.
