The Environment Agency Pension Fund (EAPF) has announced plans to “decarbonise” its equity portfolio by divesting 90% of its coal and 50% of its oil and gas stocks by 2020.
It said the measures would help address the impact of climate change, with an overall objective of ensuring its investment portfolio and processes were compatible with international government targets of keeping the global average temperature increase below 2°C relative to pre-industrial levels.
The revised policy will also see EAPF invest 15% of the fund in low carbon and energy efficient opportunities and support progress towards a low-carbon economy through actively working with asset owners, fund managers, companies, academia, policy makers and others in the investment industry.
EAPF’s current exposure to fossil fuels is roughly 2.5% of the fund (by value), for which it has a structured engagement programme to work with companies to move to a low-carbon economy.
In a statement, the EAPF said the change was “to demonstrate to our members we have a credible plan to deliver strong long-term financial returns as the impacts of climate change materialise”.
It added: “This is not a knee-jerk reaction, but a culmination of over a decade’s worth of work by the fund to consider these issues as part of the investment strategy. We are building on our successes, the growing evidence and availability of tools to allow us to better evaluate the risks and opportunities to the fund. We are also heartened by the increasing number of businesses and those in the financial community who are supportive in looking at climate change resilience.”
It has also achieved a previous target to invest 25% of the fund – actually 26.3% – in clean and sustainable companies by 2015.
The announcement comes ahead of the Conference of Parties to the United Nations Framework (COP21) which will take place in Paris in early December, with the aim of achieving a universal and legally binding agreement to address climate change.
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