LGPS Central Ltd., Wolverhampton, England, launched a £1 billion ($1.3 billion) active global sustainable equities fund with three subfunds to be managed by Mirova U.S., Liontrust Asset Management and Baillie Gifford, said a news release Tuesday.
LGPS Central runs the pooled assets of eight local government pension schemes with a combined £49 billion in assets.
An RFP was issued in June 2021.
LGPS Central CIO Gordon Ross, said in the news release that the asset class was highlighted as a priority after partner funds reviewed their investment strategies. LGPS Central then worked with the partner funds to determine the mandates, "aiming to reflect the varying risk and return targets required."
The new fund was designed to have a mix of managers investing in the most sustainable businesses, "with the expectation that it will deliver suitable return over the longer term as the world transitions to a lower carbon economy," the release said.
The subfunds managed by Mirova, Liontrust and Baillie Gifford will cover broad, thematic and targeted funds, the release said.
Initial investors are the Cheshire, Nottinghamshire, Shropshire and Worcestershire pension funds.
"The direction of travel is we believe that all the partner funds will have an allocation to sustainable funds," said Mark Davies, LGPS' investment director for active equities, in an interview. The partner funds have different approaches, so the global sustainable equities active fund was built to fit their respective risk budgets, Mr. Davies said.
The three managers hired were chosen for their firm culture. "We see them as a good partner. We are long-term investors so we expect to be working with them for the long term," Mr. Davies said.
Eric Kerry, chairman of the Nottinghamshire Pension Fund Committee, said in the release that the pension fund has earmarked an initial £320 million for the new fund, and that it "actively looks for investments which can be expected to benefit as a result of the long-term impacts of climate change and other sustainability challenges."
For Shropshire County Pension Fund, which committed £120 million to the new fund, pension committee Chairman Thomas Biggins said it will help accelerate plans to decarbonize the equity portfolios.