Islington (Parliament Politics Magazine) – Islington Pension Fund to invest 3% in the CIV (Collective Investment Vehicles) Natural Capital Fund, with commitments to markets and private debt investments.
According to an update from the investment committee, the £2 billion LGPS fund has agreed to distribute the funds, provided that the framework for the mandate’s carbon credits is clarified to guarantee that they are being used properly.
Redington has been appointed as an adviser to create the vehicle for the London CIV pension pool, which presently manages £32.8 billion in assets and originally revealed ambitions to launch its natural capital offering in October 2023.
The Islington pension fund is a part of this pool. The new approach aims to supplement current investments in renewable infrastructure while leveraging the growing demand for climate solutions among its partner funds.
The fund will be set up as an open-ended multi-manager vehicle with a 2% cash dividend, a target return of 6–8% net, and some carbon credit exposure.
When carbon credits were added to the pool, Islington expressed concerns, pointing out that it was important to make sure the credits were being used “appropriately.”
This coincides with broader reputational issues for the market for voluntary carbon credits, which has been beset by accusations of greenwashing.
London CIV responded to these issues by stating that although it was not ideal for large emitters to use carbon credits to offset their emissions, credits are frequently bought in order to fulfill compliance requirements or sustainability goals, “which are critical components of reducing overall global emissions.”
Since 2017, the pension fund has made a concerted effort to lower its carbon footprint. By making investments in renewable energy and low-carbon technology, it hopes to decarbonize its portfolio and demonstrate its dedication to both environmental sustainability and financial gains.
The fund has difficulties striking a balance between sustainability objectives and financial success. For example, it has addressed issues about the Natural Capital Fund’s usage of carbon credits, highlighting the necessity of investments that actually lower emissions.
According to the pool, the objective of preserving an open, operational free carbon credit market may be hampered by the implementation of exclusions, although these can be suggested later on as the market develops. By the time of publishing, there had been no response to Room151’s question on whether the fund had any updates on the investment.
The update disclosed that in addition to possible commitments to London CIV’s natural capital fund, Islington Pension Fund established a new mandate aimed at £100 million in emerging markets assets, which it granted to Amundi.
It added that members approved measures to overcome the £120 million shortfall in Islington’s private debt exposure over the following three years, either through new or current managers. Onboarding into Churchill’s Fund V, which is anticipated to be finished by March 2025, is one step in this direction.
What is the investment strategy by Islington?
Investing in natural resources like soil, water, air, geology, and living organisms is the main objective of the Natural Capital Fund. This supports initiatives to improve the planet’s capacity to absorb and store carbon, which is in line with efforts to combat climate change.
The fund has made commitments to emerging markets, which entails making investments in developing yet quickly expanding economies. Higher returns may result from this, but there are also more hazards.
In addition, Islington Pension Fund is making investments in private debt, which entails making loans to businesses or initiatives that are not listed on the conventional public bond markets. When compared to stock investments, this can provide steady returns with less volatility.