London CIV are pleased to announce the launch of the LCIV Passive Equity Progressive Paris Aligned Fund (“PEPPA” or “the Fund”). The Fund launched on 1st December 2021 with £520m seed investment from London Borough of Havering and London Borough of Lewisham.
The objective of the Fund is to track the performance of the S&P Developed Ex-Korea LargeMidCap Net-Zero 2050 Paris-Aligned ESG Index (GBP) (‘the Index'). The Index is based on a wider index, namely the S&P Developed Ex-Korea Large Mid Cap Index, which is representative of large and mid-cap securities of the global developed equity markets (excluding Korea).
The Index measures the performance of eligible equity securities from the wider index, selected and weighted to be collectively compatible with a 1.5°C global warming climate scenario and aims to meet the requirements of the EU Paris-Aligned Benchmark standard. The Index is progressive, as it is updated in line with any changes to the minimum standards of EU Paris-Aligned Benchmarks, and uses powerful underlying climate datasets, methodologies and ESG products. The Index is also based on a number of forward-looking metrics, incorporating factors that seek to manage transition risk, physical risk and climate change opportunities in line with the recommendations of the TCFD.
Stewardship for PEPPA is a critical part of the Fund’s core strategy. Carrying out stewardship responsibilities is an integral part of London CIV Responsible Investment strategy and a key element of fiduciary duty. For voting, London CIV will consolidate all its votes in PEPPA , set key priorities at a high level while working together with Client Funds’ priorities and the Local Authority Pension Fund Forum’s guidelines. Our voting provider Hermes EOS will execute our votes from an operational perspective along with providing expertise and guidance to ensure our votes support our stewardship priorities.
Jacqueline Amy Jackson, Head of Responsible Investment at London CIV said: “We are delighted to launch a further Paris Aligned LCIV fund that aligns with a 1.5°C trajectory toward net-zero emissions. This takes the amount of assets under management by the London CIV in Paris Aligned strategies to £1.9 billion (as of 7th December 2021). PEPPA will not only play a critical role in meeting our ambitious net zero targets, but it will also support our duty as investors to finance the low-carbon transition. Reducing climate change risk is a key priority for our Client Funds many of them have already set their own net zero targets. This Fund will support them in delivering these important objectives.”
In October 2021, London CIV committed to Net Zero Green House Gas emissions by 2040, becoming the first Local Authority pension pool to do so. The PEPPA Fund has been designed for investors who wish to be at the forefront of the transition towards a low carbon economy by seeking alignment with the ambitious targets of the Paris Agreement, which aims to limit global warming to 1.5°C above pre-industrial levels.
London CIV have appointed State Street Global Advisors Limited (“SSGA”) to manage PEPPA and track the Index. On the appointment, Alistair Byrne, Head of Retirement Strategy and UK Institutional Distribution at SSGA, said: “We’re pleased to be appointed by London CIV and to have the opportunity to help collaborate on its important work. London CIV shares State Street Global Advisors’ commitment to generating sustainable returns while driving change and this new Fund is an exciting development. To be the first LGPS Pool in the UK to offer a Paris Aligned fund is a testament to London CIV’s leadership and commitment to its values. With the new addition of a Paris Aligned Index Fund we’re proud to be able to play our part.”
London CIV have appointed S&P Dow Jones Indices (“S&P DJI”) as the index provider for its fund. Jaspreet Duhra, Managing Director and Global Head of ESG at S&P DJI said: “We are honoured to have been selected by London CIV as their preferred index provider for their new fund. S&P Dow Jones Indices is committed to developing innovative
S&P Global Public
climate-focused performance benchmarks such as the S&P Developed Ex-Korea LargeMidCap Net Zero 2050 Paris-Aligned ESG Index to support asset managers and pension funds’ ongoing efforts to prepare and transition their portfolios in the move towards a net zero economy. As an independent index provider, we are proud to do our part to promote transparency and sustainability in global markets.”
London CIV have worked in collaboration with its Client Funds via Seed Investment Groups (“SIG”) on the design of PEPPA; a passive low-carbon equity vehicle aligned with the objectives of the Paris Agreement. Climate change risk management represents an important part of London CIV’s fiduciary duty and is a strategic investment priority. 28 of London CIV Client Funds have declared a climate emergency and many have set out Net Zero plans. London CIV published on 26th October 2021 its ambition of becoming a Net Zero entity by 2040 in line with the Paris Agreement objectives to limit global temperature rise below 1.5°C. It will also become a Net Zero company across operational and supply chain emissions as early as 2025.
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