Newham to invest £520m of its pension pot in fund fighting climate change

stock pic of cash

Newham is moving £520million of its pension pot into a fund which aims to fight climate change. - Credit: PA

The town hall is to invest £520million of its pension pot into a fund which fights climate change.

Newham Council announced the decision on Wednesday (September 8) to funnel investments towards companies which are well run and socially responsible.

Cllr Nareser Osei, who chairs the local authority's pensions committee, said the move sends "a powerful message" that the Newham fund is "a pioneering responsible investor" in companies which are good at managing climate risks, good to their workers and good at the way they run their business.

She described these as vital ingredients for delivering "good" long-term investment returns which make for an affordable and sustainable pension fund.

The Paris-aligned world index fund is from Legal and General Investment Management (LGIM). 

It aligns itself to climate outcomes agreed at the International Treaty on Climate Change, Conference of Parties (COP 21) in 2015, which is commonly known as the Paris Agreement.  

In the past, the town hall has come under fire from campaigners who have been urging Newham to divest from companies which profit from fossil fuels.

A spokesperson for Fossil Free Newham said the campaign group welcomes investments which substantially reduce fossil fuel exposure in the local authority's pension fund.

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She questioned whether the move meant the fund's exposure would be 0.9 per cent in line with a pledge made by the committee.

"Will it also bring the committee closer to committing to total divestment by the time it produces its next pension strategy in 2024, as we have asked?" she added.

Newham Green Party co-chair Nate Higgins also welcomed the move, but asked how much of the pension pot is still invested in fossil fuels and "other unethical industries".

LGIM aims to align investments with reducing the world’s carbon emissions to help prevent a "catastrophic" rise in the earth’s temperature over 2C, while delivering the "strong and stable" returns sought by Newham's pension pot.

The council says using the fund will mean its pension pot "substantially" reduces its carbon footprint while helping to promote the benefits of environmental, social and good governance.

The new investment avoids investment in tobacco, oil, gas, coal and "controversial" weapon systems. 

Cllr Terence Paul, cabinet member for finance and corporate services, said: "This fund embraces the council's values and will play a key role in delivering our climate action plan."

James Sparshott, head of local authorities distribution at LGIM, said: "We are delighted the Newham Pension Fund has decided to make such a significant investment into our strategy."

Newham Council declared a climate emergency in April 2019 and after an 18-month effort, it published an action plan in July 2020.

This sets out a path as the council strives to become carbon neutral by 2030 and carbon zero by 2050.