HSBC Bank (U.K.) Pension Scheme, London, will invest £2 billion ($2.5 billion) in the Legal & General Investment Management Future World Fund, which the bank's defined contribution plan seeded last year, said Mark Thompson, chief investment officer.
Speaking at the Pensions and Lifetime Savings Association's annual investment conference in Edinburgh, Mr. Thompson said “we are about to put £2 billion of our DB money into it, so it will be a £4 billion fund.” The pension fund had £22 billion in assets as of Dec. 31, 2015.
The LGIM fund incorporates a climate tilt into its strategy, reducing exposure to those companies with worse-than-average carbon emissions and fossil-fuel assets. It also increases exposure to companies that generate revenue from low-carbon opportunities.
The move follows a decision by HSBC to change the benchmark of its £1.85 billion passive global equities investment option managed by LGIM in its £2.6 billion DC plan, to seed the money management firm's new fund. It announced the move in November. The DC equities allocation was previously managed against the FTSE All-World market capitalization index. The change sees it managed against a new FTSE All World (ex-controversial weapons) Climate Balanced Factor index.
Spokesmen for HSBC could not be reached for further comment.
Mr. Thompson was speaking on a panel discussion regarding the inclusion of environmental, social and governance factors into DC plans. He said: “The belief of the HSBC trustees is that taking ESG risk into account is completely consistent with their fiduciary responsibility.” He added that the equity allocation is the “obvious place to start” regarding ESG inclusion in DC, “and yes, there is more to come.”
Doug Morrow, associate director at ESG and corporate governance research, ratings and analysis provider Sustainalytics, said on the panel he is increasingly seeing fixed income and alternatives as areas of interest for ESG factor inclusion.
