Climate Aware index

[Rover110]

The pension fund for my employee (yes there is only one, but he does work hard) have just emailed me to say they have put 60% of the investments into "climate-aware index funds".

Presumably there's a potential hit on the returns of his defined-contribution pension (not to profit from oilies, fags and booze). Any idea where I might find historical comparisons between "generic" and "climate-aware" indexes?

[tjh290633]

That sounds like a knee jerk action to appease the woke agitators. From what I have seen, all moves in this direction are detrimental.

Better to aim at bookies, baccy and beer.

TJH

[Lootman]

That sounds like a knee jerk action to appease the woke agitators. From what I have seen, all moves in this direction are detrimental.

Better to aim at bookies, baccy and beer.

TJH

I would have thought that any pension fund manager who did this, and then under-performed, might have a liability to make the fund holders whole.

Seems like a dereliction of fiduciary responsibility to me.

[Urbandreamer]

The question was a request for information, rather than opinion.

While I share concerns about pension schemes making moral decisions for their members, haven't they always?
Did not the entire subject start when it was discovered that the pensions of medical professionals were being invested in tobacco companies?

Sadly I have no more information than any others.

What I can say is that a couple of decades ago the IC did a comparison of sin portfolios as opposed to virtue ones. The results were inconclusive.
In terms of financial return, I'd hesitate to assume that there would be a performance hit.

Ps, Climate aware, does not necessarily mean ethical. It is quite possible to avoid oil, gas, coal, metal refining etc, yet invest in booze, fags, betting etc.

https://daily.sevenfifty.com/climate-fr ... ating-how/

[AJC5001]

The pension fund for my employee (yes there is only one, but he does work hard) have just emailed me to say they have put 60% of the investments into "climate-aware index funds".

Why are they telling you? Shouldn't the choice of funds invested in be down to the employee - with a default fund (usually a basic tracker of some sort) for those not interested?

I assume there must be some agreed contract between you and the pension fund - what does that say about the responsibility of the pension fund manager for investing the money?

Adrian

[bungeejumper]

I used to deal with this kind of thing on a daily basis in my work, but I'm a bit less current these days. The problem is usually that specifically climate-change funds overlap freely with other ESG funds - indeed, I'm not even sure that there's a clean definition of what a climate change fund is? (Do you include oilies that are trying to green up Africa, or that are investing heavily in alternative energy? Some funds will, some won't.)

Financial Times is always a pretty good place to start, though. This one's three years old, so it might be better to check for newer stuff ( https://www.ft.com/investingtosavetheplanet) But the author, Alice Ross, is solid. The FT's Personal Finance pages are another constantly fruitful source.

Check MorningStar: https://www.morningstar.co.uk/uk/news/2 ... -over.aspx will give you a good grounding that isn't too dewy-eyed behind the ears. The performance table for US climate funds in 2022 really doesn't look that good (although, to be fair, it was a year when the S&P also struggled).

For more up-to-date news and views, try https://www.morningstar.co.uk/uk/news/a ... ATE+CHANGE.

HTH

BJ

[Rover110]

Thanks for your replies.

Although I am suspicious of any change, I did want to steer the discussion towards "how much might it affect the returns".
If we talking about less than one per-cent per annum (inclusive of charges) with standard-deviation substantially higher, then the "leave in the now-climate-friendly default pot" option would be what I would do in my employee's shoes.

I have forwarded the pension company email to him without comment. (Maybe they also sent something similar to him directly).
But I'd like to have a helpful response if he asks me about it.

[bungeejumper]

Although I am suspicious of any change, I did want to steer the discussion towards "how much might it affect the returns".

I don't think you'll get a detailed response, or one that's universally valid. But the global picture is that tackling climate change hasn't historically been a money spinner unless you happen to be making wind turbines, or maybe EVs or heat pumps.

For everyone else, including governments, it's decades of massive unrelenting cost and development up front, and the returns are going to be long-term and slow-boil - and dammit, the companies that make the investments won't even be the main beneficiaries. (It can be quite hard to convince your board that your company should spend billions on something that'll be there for the general benefit of all mankind. Even for the Chinese, who are still building coal fired power stations at the rate of one a week.)

So far, so cynical. (Sorry. ) The angels are on the side of a cleaner world, and it's great that pension funds are getting heavily into the sector. Everybody wants to leave the world a better place, after all. But investment managers have more than one hat to wear, and they need growth for now, not just for later. A judicious mix of policies is always going to be a safer bet. That much seems obvious, at least to me.

In the short term, there's more. High borrowing costs, rising government deficits and wobbly currencies add another layer of short-term unpredictability, and all of that is putting a slow brake on construction projects, although hopefully not a lasting one. Times will change for the better, but right now it isn't a wonder that enthusiasm has waned a bit.

BJ