USS and the University of Exeter have outlined new climate scenarios that focus on short term, real world impacts and are more useful for investors. USS will use them to develop a long-term investment outlook and top-down portfolio construction.
The UK’s largest private pension fund, USS has made ground on its path to net zero with effective engagement, measuring the Scope 3 emissions of its corporate assets and bottom-up carbon analysis focused on transition risk in emerging market equities. But investors need policy makers to do much more.
Speaking at USS’s 2022 Institutions’ Meeting, Simon Pilcher told stakeholders that the asset manager had navigated market turmoil in the UK bond market by having less leverage than peer funds and diversification, explaining USS also hedges inflation and interest rate risk with US bonds.
Investor engagement and stewardship programmes seek to change corporate behaviour, reduce risk and shape positive real world impacts. But experts notice that to be most effective investors need to ensure they are seeking to change the most material and important issues.
Scenario analysis shows that the ability of pension funds to pay their pensions will be severely impacted by climate. But a discussion between asset owners at Sustainability in Practice revealed the challenges in the process.
The largest single pension scheme in the United Kingdom, USS, took advantage of the dislocation due to COVID in 2020 and has bought credit assets and increased inflation and interest rate hedging.
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