NILGOSC has completed the transfer of £2.8bn of investments in global equities from funds that follow standard indices to the Legal & General Low Carbon Transition Fund. The fund aims to reach the goal of achieving Net Zero carbon emissions by 2050.
NILGOSC has been taking action to mitigate Climate risk since 2008. Its investment fund, currently valued at around £10bn, uses a range of fund managers to make decisions about which investments to hold. Each of these managers are required to take climate change into account, as well as other environmental, social and governance issues, when making investment decisions. NILGOSC also makes investments that are designed to follow an index without such active decision making. It is these investments that have now been transferred to the Low Carbon Transition Fund so that climate risk can be incorporated.
LGIM
The fund, which is managed by LGIM, tracks the ‘Solactive L&G Low Carbon Transition Developed Market’ index. The strategy behind the index is to reduce exposure to carbon emissions over time. The index initially reduces carbon intensity by 70% relative to the starting universe and aims to reach the goal of achieving Net Zero carbon emissions by 2050. The universe of holdings within the index covers all developed markets but is slightly reduced by two exclusions: companies that derive 30% of their revenue from thermal coal mining; and manufacturers of controversial weapons. Each holding within the remaining universe is assigned a climate score, based on three main indicators: emissions intensity; reserves intensity; and green revenues. Using the overall climate scores, an adaptive tilt away from climate laggards and towards climate leaders is applied to capital allocation within the index.
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