The United Nations Joint Staff Pension Fund (UNJSF) and Cambridge University have pledged up to $750m (€660m) to an upcoming bond index designed to drive corporate decarbonisation.
Researchers at Cambridge University have spent the past two years designing the index with the support of a group of asset owners including the California State Teachers Retirement System (CalSTRS), the UK Universities Superannuation Scheme (USS) and Swiss national pension fund, Publica.
The UN’s $88bn, New York-based pension scheme has confirmed that it plans to allocate up to $500m to a strategy tracking the index once it is fully up and running later this year.
In 2023, MSCI stated that the pension fund’s Office of Investment Management used “bespoke versions of a Bloomberg MSCI Fixed Income Index to align its portfolio of listed corporate bonds with a 1.5°C pathway”.
At the time of writing, UNJSP had not responded to a query about whether it would reallocate from that index to the new one.
Last week, Cambridge announced it had selected Bloomberg as the provider for the index, and the university’s own treasury will invest up to £200m against it when it launches.
CalSTRS, USS and Publica have not yet publicly confirmed whether they intend to license the index or invest in a fund that tracks it.
Methodology
The Bloomberg Cambridge University Fixed-Income index seeks to offer climate-aware investors an alternative to green bonds or debt from low-carbon issuers.
Based on an investment-grade version of the Bloomberg Global Corporate index, it screens out bonds from energy companies that are not demonstrably phasing-down their fossil fuel activities.
It also looks at the proportion of fossil-fuel lending and underwriting that constituents in the insurance and banking sectors are responsible for, and overweights those with the lowest exposure.
Other issuers in the universe are evaluated based on their sectoral and geographical context, and how they perform against a 1.5°C climate scenario developed by green central-banking body, the Network for Greening the Financial System.
The index is optimised to minimise tracking error.
Finally, the researchers at Cambridge have been exploring how the index can be used as a tool for bondholder engagement.
“Because the methodology is rules-based and quantitative, it’s easy for companies to understand what investors expect from them by the next time they come to market,” said Lily Tomson, a senior research associate at Cambridge.
“It allows engagement to occur with issuers at any point, rather than just in the few days surrounding a deal,” she told IPE.
Tomson’s team will continue to publish research to support investors using the index to engage effectively during and after the issuance process.
