UK’s Largest Private Pension Fund Commits to Net-Zero by 2050

The $93.9 billion Universities Superannuation Scheme (USS), the UK’s largest private pension fund, has committed to becoming carbon net-zero by at least 2050 with the aim of reaching that goal even sooner if possible.

The pension fund made the pledge to align itself with the Paris Agreement, which is intended to keep global temperatures from rising by no more than 2 degrees Celsius. It also said this means that the companies it invests in will be net carbon zero by 2050.

“The UK has made a legally binding commitment that the UK will be carbon zero by 2050,” Simon Pilcher, chief executive of USS Investment Management, said in a video statement to plan participants. “And, therefore, we need to make sure that our portfolio of companies are running themselves to be ready for that.”

Last June, USS announced plans to exclude and possibly divest from companies in sectors that it deems “financially unsuitable” for the pension plan over the long term. The sectors the fund targeted included tobacco manufacturing, thermal coal mining, and companies that may have ties to industries that manufacture cluster munitions, white phosphorus, and landmines. The decision was made after a detailed review of the long-term financial factors associated with investing in those sectors.

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The fund decided that the traditional financial models used by the market as a whole to predict the future performance in the targeted sectors had not taken specific risks into account. USS Investment Management said those risks include changing political and regulatory attitudes and increased regulation that would damage the prospects of businesses involved in these sectors.

USS said while many of the larger companies it invests in directly have already made commitments to reaching carbon net-zero by 2050, it can do more to encourage others. It also said it can also change the internal benchmarks it uses to judge the fund’s performance to include more environmental, social, and governance (ESG) and climate criteria.

“If we’re not looking carefully at how your money is invested, and getting ready for a zero carbon world, then the value of our portfolio will suffer,” Pilcher said. “And we’re determined to ensure that we thrive.”

The pledge follows other UK institutional investors that have recently vowed to be carbon net-zero by 2050. In March, UK insurance and financial services giant Aviva unveiled plans to become net-zero of carbon emissions by 2040. The firm’s goal includes a 25% reduction in the carbon intensity of its investments by 2025, which would increase to a 60% reduction by 2030. It also said it will aim to reach net-zero carbon emissions from its own operations and supply chain by 2030.

In December, The Church of England’s General Synod set new targets for the church to work to become carbon net-zero by 2030. And last August, UK pension fund the National Employment Savings Trust (NEST), which says it’s the largest pension in the country by membership, announced a new climate change policy designed to halve the carbon emissions in its portfolio within 10 years and make it completely net-zero by 2050.

UK Pension NEST Aims for Net-Zero Carbon by 2050

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Tags: Climate Change, David Russell, ESG, global warming, Greenhouse Gas Emissions, Net Zero, Paris agreement, Simon Pilcher, Universities Superannuation Scheme, USS

Panels, open to CIOs and allocation investment team members, were chosen by chief investment officers to be helpful for the pandemic investing environment.

Last Chance: Registration Closing for CIO SummitDuring the pandemic, there’s been a flurry of meetings and an increasing sense of “Zoom fatigue.” CIOs need to pick and choose where their time is best spent, and what online events are most relevant to what they do.

With that in mind, months ago, our editorial staff at CIO reached out through personal emails and phone calls to the CIO community and asked them for advice on topics and speakers that would be especially helpful to them. We received many suggestions, and chiseled them down for our 2021 Virtual Chief Investment Officer Symposium to 11 panels, spread over four days (May 11-14), specifically targeted for CIOs and their allocation teams.

The panels will be small and intimate and dive deeply into what other CIOs are doing. For example, since 90% of our advising CIOs recommended a panel on investing in China, we’ll have a fireside conversation with Sau Kwan, president of E Fund Management, one of the largest managers inside China, as well as a separate panel of successful stateside allocators to China: CIOs Ash Williams (Florida State Board of Administration) and Brian O’Neil (Robert Wood Johnson Foundation), as well as Trinity Church Wall Street’s Managing Director Sophia Tsai, in a conversation moderated by Hong-King based consultant Janet Li from Mercer.

Learning that CIOs were curious about Bitcoin and new alternatives, we found two of the few pension funds that currently allocate to a Bitcoin fund and will be having an in-depth conversation on blockchains and the other alternatives they find lucrative with Andy Spellar, chief investment officer of the Fairfax County Employees’ Retirement System, and Katherine Molnar, chief investment officer of the Fairfax County Police Officers Retirement System.

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The CIO Summit will also feature a special keynote currency presentation by Aaron Hurd, managing director of US currency for State Street, on how to use foreign currency in what could be the mildest US bear market in history.

Chris Ailman, the CIO of one of the largest US pension funds, the California State Teachers’ Retirement System (CalSTRS), who’s known for his sharp, inquisitive logic and forward-thinking leadership toward sustainability and environmental, social, and governance (ESG) investing, will join a panel on building sustainable portfolios with the investment team at BlackRock to discuss what strategies and constructs are critical to strengthen portfolios for the future. ESG strategies, challenges, and climate considerations will be part of the discussion.

The CIO staff also found there was quite a bit of curiosity about special purpose acquisition companies (SPACs), private investment in public equity mechanisms (PIPEs), and pre-initial public offerings (IPOs), and we have invited three CIOs, (some of whom have SPAC fund allocations) to explore the issue with Ronald Temple of Lazard. The CIOs are all known for their thoughtful and highly successful returns during the pre- and current COVID-19 investment landscape.

Diversity and inclusion has been a huge topic in our industry, and on Thursday at 2 p.m. EDT, three CIOs leading the effort, Robin Diamonte of Raytheon, Bryan Lewis of US Steel, and Doug Brown of Exelon, will discuss how they’re currently advancing the mission, how they are increasing their mandates for managers, and what kind of teams they’re building to benefit their investments.

A Friday special panel on using scientific processes and research in investments will include Nick Moakes of the Wellcome Trust, who was able to use his fund’s health care acumen to position his portfolio before the COVID-19 market crash. Elena Manola-Bonthond, who holds a Ph.D., MBA, and was on the research team before becoming CIO of the CERN Pension Fund (the European Organization for Nuclear Research), will speak about how she applies her knowledge. Nick Mazing, head of research at Sentieo, will give an insider’s view on how investors are currently raising the stakes and expanding the use of artificial intelligence (AI).

Our last panel, on Friday at 1 p.m. EDT, will be on undervalued, “unloved” prospects and long-term opportunities created by the pandemic. Jack Rich, president and CIO at ACIMCO (Investment Management Company for Abilene Christian University), will discuss his innovative investments that balance both old and new energy investments. Mauricio Guzmán, CFA, CAIA, chief investment officer, Pontificia Universidad Javeriana, who built the first endowment in Colombia, will discuss what he’s seeing in both real estate and emerging markets from his Latin America viewpoint, and family office investor John F. Tsui, managing principal, Peninsula House LLC, will give an insider’s view on direct investments that he has found worthwhile in a conversation moderated by Spencer Hunter, senior consultant of RVK.

A rapid discussion moderated by Sean Bill, CIO of the Santa Clara Valley Transportation Authority (VTA), on fixed income, interest rates, and the Fed in a post-vaccine world will take place on Tuesday at 2 p.m. EDT, featuring Matt Clark, CIO of the South Dakota Investment Council, who has one of the few fully funded plans in the United States, and CIO Paul Colonna, a “new-ish” CIO at Lockheed Martin, who has been reorganizing his fund. This discussion will take the pulse of where we are, navigate the current interest rate environment, and vet the questions about inflation and opportunities, as well as lessons learned in the COVID-19 market.

With a CIO’s career in mind, Walter Kress, CIO of EY (who has never been placed to a financial services position by a recruiter) will ask questions of top recruiters Renee Neri, head of asset management, Americas, Heidrick & Struggles; David Barrett, founder, David Barrett Partners; and Jeff Warren, co-head of the private equity practice, Russell Reynolds Associates, on Thursday at 11 a.m. EDT.

Registration is open to CIOs, allocators, and their investment teams. It’s about to close, so register for next week’s CIO Summit here.

Tags: Investment