How we helped our client gradually reduce their exposure to fossil fuel risks
After being prompted by member queries about the DB pension scheme’s fossil fuel investments (FFI) exposure, we helped the trustees understand the risk and manage it over time.
The trustees wanted to understand the financial and reputational risks of FFI - for example, shares in oil, gas and coal companies.
FFI could be seen as inconsistent with the sponsor’s organisational values, so FFI posed a reputational risk that could damage the sponsor covenant.
We advised on the risk that FFI could become 'stranded' and suffer a large fall in value due to climate policy.
Our high-level analysis of the scheme’s eleven investment funds found that:
- four funds had limited exposure to FFI
- four funds had FFI exposure but were illiquid or had diversification benefits
- three funds with FFI exposure were identified for review
We helped the trustees draft a policy for responding to member and external queries about FFI.
Our analysis allowed the trustees to better understand their FFI exposure.
They decided to make a gradual move out of the three funds identified for review, as part of a plan to reduce their allocation to return-seeking assets. This meant that FFI risk exposure would be reduced gradually over time with minimal effort.
The policy allows the trustees to be ready to respond to any queries they receive about FFI.
How we can help
We help you make important investment decisions, and make sure that your investments are performing as you need them to.
We help you get your investment strategy right to ensure good member outcomes in your DB and DC schemes.
Our investment team works with trustees of DB and DC schemes to set bespoke investment strategies and select fund managers. Using our market-leading technology, we help you navigate your journey by providing you with clear, actionable insights which enable you to make better short and long-term investment decisions.
We help our clients understand and implement responsible investment principles.