Fund Solutions

Nest Builds ESG into Infrastructure Investments

Infrastructure will make up 5% of Nest’s portfolio; EAPF announces net-zero targets.

UK auto-enrolment workplace pension scheme Nest is strengthening its position in unlisted infrastructure equity, having factored ESG considerations throughout the procurement process.

Partnering with CBRE Caledon Capital Management, the private infrastructure investment arm of CBRE Global Investors, and GLIL Infrastructure, Nest will be investing up to £3 billion to infrastructure equity globally by 2030, making up 5% of its portfolio.

Infrastructure can offer diversification benefits for the portfolio at lower levels of risk, Nest said, adding that types of investment in this area could include fibre networks, water and waste treatment plants, and social housing.

CBRE Caledon and GLIL Infrastructure were screened at every stage of the procurement process based on their performance on ESG, according to Katharina Lindmeier, Responsible Investment Manager at Nest.

“This gives us confidence that the fund managers we’ve selected share the importance we place on understanding and managing ESG risks in our investments. We expect them to thoroughly review every asset they add to our portfolio, and we’ll monitor these investments to ensure we’re satisfied,” Lindmeier said.

“We expect to invest a significant proportion of Nest’s portfolio in a variety of sustainable infrastructure projects, including digital infrastructure, energy, transportation and utilities,” said Andreas Köttering, Portfolio Manager and Head of Infrastructure Europe at CBRE Caledon.

This follows news last month that Nest appointed Octopus Renewables, part of Octopus Group and one of the largest UK investors in onshore wind and biomass, to boost its investment in clean energy infrastructure.

Bolstering investments in infrastructure and clean energy “represents a major step in the sophistication of Nest’s investment strategy”, said the pension scheme, which currently manages more than £16 billion in AUM, in its statement.

Separately, the UK’s Environment Agency Pension Fund (EAPF) has announced plans to halve its carbon emissions by 2030, reaching net-zero by 2045.

Asset manager Mercer partnered with EAPF to put formulate the fund’s strategy.

“EAPF is approximately four to five years ahead of a decarbonisation pathway consistent with a 1.5⁰C scenario, based on a decarbonisation curve consistent with the Intergovernmental Panel on Climate Change (IPCC). Our analysis shows it has already achieved the emissions reductions thought to be necessary by 2024/25,” said Lucy Tusa, Partner at Mercer.

As part of the Local Government Pension Scheme, EAPF has 39,000 members and manages £4 billion AUM.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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