USS sees new £500m private markets move as net-zero help

Universities Superannuation Scheme (USS), the UK’s largest private pension scheme, has announced a €598m private markets mandate that it said will support its net-zero ambitions.

The £82bn scheme today announced that it was aiming for the emissions associated with the holdings in its investment portfolio – across public and private debt and equity – to be a quarter lower by 2025 and halved by 2030.

It will measure this in terms of carbon emissions intensity rather than as absolute emissions, a point that was criticised by campaign group Ethics for USS.

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The pension fund first announced a 2050 net-zero ambition in May last year, but did not set out interim targets.

It is betting on engagement with companies to drive the emission reductions, but today also said that a new £500m “Sustainable Growth” mandate would support its net-zero goals.

The £500m would be invested globally, either directly or through funds, in high growth, privately-owned businesses that are developing technologies and services that will help companies and the broader economy to decarbonise, USS said.

The new mandate will be managed by the private markets group within USS’s in-house investment management team and benefit the defined benefit and, over time, the defined contribution segments of the scheme, USS said.

“We hope that these announcements give confidence to our members and to other stakeholders of the seriousness with which we are treating decarbonisation,” said Bill Galvin, group chief executive officer of USS.

“This is not an easy task, and along with the rest of the industry we will face challenges in the early years before the data quality improves, but these targets are a statement of intent, and give us important staging posts against which to assess our progress.”

Last month USS announced the introduction of a climate “tilt” for £5bn of its equity investments, via the adoption of a benchmark meeting minimum EU climate benchmark standards.

“The climate tilt and new investment mandate form part of a much bigger plan that will involve all of our investment professionals and the management teams of our portfolio companies,” said Galvin.

“Indeed, we will need to work closely with our industry peers, regulators, governments and many others. Ultimately, we all need to work together to achieve net zero.”

Source: IPE

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