Tuesday, April 23, 2024

Hundreds of billions in pension funds commit to emerging markets switch 

12 of the UK’s biggest pension funds have made a joint commitment to supporting the global climate transition by refocusing their investments in emerging markets. As a result, some £400 billion of savings locked into some of the nation’s biggest pension funds will be ring-fenced into emerging markets to invest in a more sustainable future for the planet. 

The announcement was made at a net-zero delivery summit in London. The press release reiterated the funds’ joint commitment to scaling investments in favour of emerging markets and collaborating to ensure a more significant impact. 

The most notable British pension funds included in the pact 

The joint move was led by the Church of England Pensions Board, which manages assets worth in excess of £3.7 billion. This fund is ten years ahead of its net-zero target, having invested almost 12 times more in green energy than fossil fuels. Other partnering pension funds include the Universities Superannuation Scheme, worth £83 billion, the £57 billion BT Pension Scheme and the £55 billion Border to Coast Pensions Partnership. 

Source: Unsplash

The group committed to weighing up the “most practical and effective way” to pinpoint and “scale the funding” towards emerging markets, having acknowledged the “urgency of the transition” to underpin this economic shift. It also reiterated the need to work collaboratively with major global financial institutions to “target” the right emerging markets. If even the biggest pension funds are finding a shift to social and ethical investing a challenge, so will individuals managing so-called ‘DIY portfolios’. 

For investors at the beginning of their investment journeys, it can be a daunting prospect to know which funds or markets to invest in. However, for those who choose stocks and shares ISAs to invest free from income and capital gains tax, exchange-traded funds (ETFs) can potentially be a good investment, offering diversification across different economies and markets. As always with investing, remember that your capital is at risk, and you might get back less than you initially invested. 

ETFs are funds that trade on the stock market and usually track the performance of a market index or basket of stocks, making it easier to spread your money across a varied range of companies.   

In addition, there are several sustainable and socially responsible ETFs featuring some of the greenest and most innovative companies pioneering everything from renewable energy to vegan produce. 

Attention turned rapidly to COP27 in Egypt 

The statement of intent from a dozen of the UK’s biggest pension funds was made following the City of London’s net-zero summit, which was jointly hosted with the COP26 UK Presidency 2022. The summit discussed areas of progress related to the fiscal priorities highlighted during COP26 in Glasgow and looked ahead to COP27, staged in Sharm el-Sheikh, Egypt, this winter. 

Within the joint statement, Clive Mather, chair of the Church of England Pensions Board, reinforced the need to “increase ambition” and collaborate with fellow “investors” to achieve the necessary levels of “investment required in emerging markets”. Emma Howard Boyd, chair of the Environment Agency Pension Fund, admitted that “significant market shifts” were yet to materialise. In addition, Ms Howard Boyd noted that emerging nations have grown irritable at the lack of investment as the $100 billion in promised “climate finance” from “industrialised nations in 2009” had still “not been delivered”. 

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