Pension Fund 'The People's Pension' Transfers £28bn from State Street Due to Disagreement on Stewardship Practices
The People's Pension, a leading UK defined contribution (DC) master trust with over £30bn in assets, has made a significant move in its investment strategy, reducing its investments with US manager State Street. This shift comes as part of a broader overhaul aimed at enhancing the master trust's commitment to climate stewardship.
Amundi and Invesco have been appointed to manage the bulk of the master trust's assets, marking a significant change from State Street Global Advisors, which will continue to manage the remaining £5bn of the portfolio. The appointment of Amundi as passive equity manager was influenced by the manager's high ranking in ShareAction's Voting Matters score.
The People's Pension plans to commit some £4bn to private markets by 2030, and this move is part of a wider strategy to incorporate climate considerations into its investment and governance processes. The master trust expects to reach £50bn in assets within the next five years and £100bn over the next ten years.
The shift towards investing through segregated mandates is a key part of the master trust's evolution. The People's Pension has transitioned £28bn of its assets into segregated mandates held by Northern Trust. This approach could potentially send an important signal to managers about asset owners' commitment to climate targets.
Master trusts like The People's Pension take a structured and proactive approach to climate stewardship. They closely monitor carbon exposure and climate-related risks within their investments, setting carbon intensity targets, and reviewing climate-related goals regularly to ensure alignment with net zero ambitions. They also work collaboratively with fiduciary managers and asset managers to ensure high standards of ESG integration and climate risk management.
The master trust's stance on climate sends a crucial signal to the wider institutional market. By participating in regulatory developments, such as supporting frameworks like the UK Transition Plan Taskforce and adapting to evolving stewardship guidelines encouraged by bodies like The Pensions Regulator, master trusts like The People's Pension are driving change in the investment industry.
The master trust has expanded its investment team to more than 20, and it has built bespoke investment management agreements (IMAs) with net-zero commitments and custom exclusions. The People's Pension has yet to confirm direct investments in climate solutions.
The timing of State Street's exit from Climate Action 100+ was noted by the trustees of The People's Pension, but it was not the sole trigger for change. Over the past three years, State Street's backing of ESG resolutions had fallen from 30% in 2021 to 9% in 2024, according to ShareAction. State Street is ranked 63rd out of 70 in ShareAction's latest Voting Matters report, showing very little backing for social and environmental resolutions.
Despite its departure from State Street, The People's Pension remains focused on growing its franchise in the UK DC and other markets. The master trust continues to offer responsible investment options to members and publishes dedicated climate change reports outlining targets, metrics, and progress, emphasizing transparency and accountability in stewardship practices.
In summary, The People's Pension is demonstrating a strong commitment to climate stewardship by embedding climate risk in its governance frameworks, collaborating with asset managers to enhance their climate commitments, and engaging investee companies to drive corporate climate action. This shift in investment strategy is a clear signal of the master trust's dedication to sustainable and responsible investing.
[1] The People's Pension, "Climate Change Report 2022," [Link to the report] [2] ShareAction, "Voting Matters 2023," [Link to the report] [3] The People's Pension, "Responsible Investment Policy," [Link to the policy] [4] UK Transition Plan Taskforce, [Link to the taskforce]
- The People's Pension, recognizing the importance of environmental-science, has committed to invest £4bn in private markets by 2030, with the aim of integrating climate considerations into their investment and governance processes.
- Financial institutions, including Amundi and Invesco, have been selected to manage a considerable portion of The People's Pension's assets due to their strong commitment to climate-change stewardship, as exemplified by Amundi's high ranking in ShareAction's Voting Matters score.
- In order to further emphasize their dedication to climate stewardship, The People's Pension has expanded its investment team and constructed bespoke investment management agreements (IMAs) with a focus on net-zero commitments and custom exclusions, while also showing interest in investing in climate solutions as part of their future business strategy.
