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One of the UK’s largest pension funds has pulled £28bn from State Street, in a high-profile example of an asset owner pushing back against the retreat from ESG among the biggest US asset managers.
After a review of its responsible investment policy, The People’s Pension decided to hand a £20bn developed market equity mandate to Amundi and £8bn of fixed-income assets to Invesco.
The scheme, one of the UK’s largest multiemployer defined contribution schemes, said the two companies would run the funds “with a focus on responsible investment”. It retained just £5bn with State Street, which had previously managed all of its assets.
The move comes amid rising tensions between long-term investors and US asset managers, which have downgraded so-called environmental, social and governance investing after Donald Trump’s election. Money managers have also been targeted by right-wing campaigns opposed to corporate action to limit global warming and promote diversity.
“By selecting Amundi and Invesco, we have chosen to prioritise sustainability, active stewardship and long-term value creation,” said Mark Condron, chair of trustees for The People’s Pension, which aimed to “balance strong financial performance with responsible investment principles”.
“The big theme has been an increasing difference in the positioning of US versus European asset managers. That’s a huge story,” said Dan Mikulskis, chief investment officer of People’s Partnership, which operates The People’s Pension.
Mikulskis said differences in approaches among asset managers had become “more and more apparent”, which made it easier to assess which best fit with what the fund wanted to achieve. The scheme aims to align all of its investments with the goal of keeping global warming below 1.5C above pre-industrial levels.
The People’s Pension had been looking to increase the number of asset managers it invests with following the rapid growth of the fund, which stands at £33bn and is forecast to reach £60bn by the end of the decade. The scheme has almost 7mn members.
Responsible investment campaign group ShareAction this month criticised State Street alongside BlackRock, Fidelity Investments and Vanguard for a “worrying retreat from ambition” as the asset managers, which together manage $23tn in assets, collectively supported just 7 per cent of shareholder resolutions on ESG last year.
Amundi said its responsible investment commitments were a “key factor” in its appointment, and the £20bn developed market equity index mandate would be climate-focused. Mikulskis said the appointments came after a 10-month review of several managers. Invesco’s management of £8bn of sovereign and corporate bonds will feature net zero alignment alongside ESG analysis and active engagement with issuers.
State Street said it would focus on growing its presence among UK defined contribution pension schemes and other markets, and that it had a “strong pipeline” for this year. “We look forward to continuing our work with The People’s Pension on the remaining mandates,” the company added.
The switch of mandates comes as a group of 26 financial institutions and pension funds this month asked their asset managers to more actively engage with companies they are invested in about their climate risk.
Some big US pension funds have also warned against dilution of climate reporting standards.
Marcie Frost, chief executive of the $536bn California Public Employees’ Retirement System (Calpers), last week said she was “concerned” after the Securities and Exchange Commission signalled it would no longer defend its climate disclosure rule in court.
Calpers, which manages £353bn of assets, said it would hold companies accountable for climate-related disclosures.
