Whether you want to choose greener investments or not, your pension funds are likely to be spent on wind turbines, recycling EV battery packs or closing down coal fired power stations and cleaning up decades of contaminated soil. That’s the mood music at COP26 and right across the pensions sector right now. Here’s an update from WTW, who betting big on climate transition projects. But will these schemes make a profit that will help pay your heating bills when you’re in your 70s? Ah well, there’s always crypto…
LifeSight, Willis Towers Watson’s defined contribution master trust, is investing nearly $1bn in Willis Towers Watson’s Climate Transition Index (CTI) fund for mainstream mobilisation towards its climate goals. Based on the ground-breaking STOXX Willis Towers Watson Climate Transition Index, for the first time investors can support climate transition risk within their mainstream equity portfolios while also supporting net zero alignment.
The LifeSight investment is being announced on Finance Day of the CoP26 Climate Summit in Glasgow as Willis Towers Watson CEO John Haley is due to speak on the summit stage with CoP26 President Alok Sharma on the need to redirect the Invisible Hand of economics to shape a resilient future.
John Haley, CEO, Willis Towers Watson, said: “This fund embodies the new climate-smart economics and finance for the structural changes we need in mainstream markets. I’m delighted that we bring this practical solution that meets the high ambitions expressed on CoP Finance Day.”
The CTI fund is a UCITS vehicle that has been launched through AMX (the “Asset Management Exchange”), an affiliate of Willis Towers Watson. The fund tracks the STOXX Willis Towers Watson World Climate Transition Index, which makes a forward-looking, bottom-up evaluation of transition risk and opportunity for each company.
The index looks beyond carbon emissions to provide a more sophisticated way of managing climate risk, using its Climate Transition Value at Risk (CTVaR) methodology to analyse the impact that moving to a low carbon economy, aligned to the Paris agreement, will have on projected company cash flow.
The CTI fund received regulatory approval at the end of October and LifeSight’s investment will take place in several stages by the end of this year. It will be joined by approximately $75m of investment from other Willis Towers Watson clients, amounting to a total of approximately $1bn investment from defined contribution and defined benefit sources by the end of 2021.
Fiona Matthews, Managing Director, LifeSight, said: “LifeSight’s investment in the CTI fund is the next stage in our journey to reaching net zero emissions across our default investment portfolios. LifeSight has been at the forefront of sustainable investing since its inception and we understand that an orderly transition to a net zero economy is an urgent global priority.
We believe that achieving the goals of the Paris agreement are clearly in the direct financial interests of our members, so our investment in the CTI fund enables our members to benefit from the additional value created by organisations that are best placed to benefit from the transition to a low carbon economy.”
Craig Baker, Global Chief Investment Officer, Willis Towers Watson, said: “LifeSight’s investment in the CTI fund is a great example of investing in the Environmental, Social and Governance (ESG) space in a way that has a clear financial case. The fund provides a robust framework for quantifying and incorporating the financial impact of climate risk and is designed to provide investors with greater exposure to those organisations that are most likely to benefit from the climate transition and reduced exposure to those that are ill prepared.”
LifeSight was the first master trust to embed ESG into its default investment strategies. In July this year, it committed to targeting net zero greenhouse gas emissions across all of its default funds by 2050, with a 50% reduction by 2030, in line with the Paris agreement, as well as a self-select Climate Focused Fund.
Its commitment to net zero covers all its defaults, which represent the vast majority of its total assets under management, currently over £11bn. LifeSight’s full set of investment beliefs, including those regarding sustainability, are included in LifeSight’s primary governance document, the Statement of Investment Principles.