Wiltshire Pension Fund has set an investment belief: “We seek to invest in a way that, where possible, aligns the interests of the Fund with those of the contributing employers and the Fund membership”.
The challenge
Amending the investment strategy to take account of climate change risk involved a full assessment of climate scenario modelling to demonstrate how the Committee should respond in the best financial interests of the Fund. This required looking at the problem from multiple points of view - investment returns, actuarial, legal, and taking account of the views of the scheme members and employers. We wanted to make contact with as many members as possible, which is challenging with such a diverse audience across several geographies and age groups. However we felt it was important to obtain as representative a picture as possible, and also to engage with as many members as we could, and raise awareness.
The solution
We designed a survey for the membership which framed key concepts and questions in an accessible way for beginners. Our approach was to use Mailchimp to contact all members for whom we had email addresses (via member self service or e-payslips for pensioners), and then attempt to reach the rest of the active membership through the communications of our employer organisations. We kept the survey open for three weeks, and sent regular reminders in order to maintain awareness and encourage engagement.
The impact
We received responses from over 2,200 members, which for the size of our Fund showed a significant level of engagement. We learned that members wanted us to balance investment returns with ESG issues, and that it was very important to members for us to invest in sustainable and/or low carbon assets (86 per cent answered yes or maybe to the question "is it important to you for the Fund to invest in sustainable and/or low carbon assets?"). From our climate scenario modelling we also learned that the Fund should set a target of net zero by 2050, which has now been done. We also learned that the Fund could take advantage of investment opportunities by setting strategic allocations to sustainable equities and renewable infrastructure.
How is the new approach being sustained?
Since the survey, and setting the target of net zero by 2050, we have developed our approach to member engagement on climate related issues, and also progressed our target setting to include interim carbon reduction targets (to 2025 and 2030). We have published a dedicated climate webpage which sets out our journey so far, and promoted transparency by sharing the results of our climate scenario modelling, and investment case studies. We are early adopters of the Task Force on Climate-related Financial Disclosures (TCFD) reporting, which is published online. In the run up to COP26, we ran a further engagement campaign with our scheme membership by designing a colourful factsheet to share key facts about our journey to net zero, and why this is important for the investments.
Lessons learned
From a climate perspective, we learned that we needed to properly assess the potential financial impact of climate change on the Fund's investment returns, and that we needed to take action both to protect the investments, but also to take advantage of the opportunities arising from a transition to a low carbon economy. From an engagement perspective, we learned that our members care about this issue, and that it is reassuring for them to know how the Fund is tackling this risk.
Contact
Jennifer Devine, Head of Pension Fund Investments