The People’s Pension moves £28bn from State Street citing stewardship misalignment

The People's Pension, one of the UK's largest defined contribution master trusts with more than £30bn in assets, has reduced its exposure to US manager State Street, citing misalignment on climate stewardship as one of several factors, Net Zero Investor reports. The move is part of a wider overhaul of the master trust's investment strategy. Chief investment officer Dan Mikulskis told Net Zero Investor that the fund had previously invested virtually all its assets with State Street through pooled funds. Roughly £28bn has now been transitioned into segregated mandates held with Northern Trust, a structure intended to provide greater control and flexibility.

The fund has appointed French manager Amundi and Henley-headquartered Invesco to manage the bulk of its assets. Amundi will run the £20bn passive equities portfolio, and Invesco will take more than £8bn in active fixed income. State Street Global Advisors keeps the remaining £5bn. A year earlier, the fund had moved the bulk of its passive equity holdings into a climate-aware strategy managed by State Street, so the latest changes go further. Mikulskis said the fund had outgrown its pooled setup given more than £300m in monthly inflows and over 6.5m members.

The People's Pension has been a leading participant in an initiative among long-term asset owners pressing managers to uphold climate pledges. Twenty-six asset owners representing more than $1.5trn have issued a guideline on stewardship alignment, expressing concern about managers publicly backtracking on climate commitments. Leanne Clements, the fund's head of responsible investment, said the trustees had raised climate stewardship concerns with State Street as part of a "slow-burn engagement process". She said State Street's exit from Climate Action 100+ was "certainly noted" and was part of the broader evaluation, though not the sole trigger. ShareAction's Voting Matters report ranks State Street 63rd out of 70 managers. State Street, which has more than $4.7trn in assets, said it remained focused on growing its UK DC franchise and would continue work on the remaining mandates. Amundi, which ranks 6th out of 70 in the same ShareAction report, was selected partly on responsible investment considerations, according to Mikulskis.

The fund still has work to do. Net Zero Investor's comparison of master trusts places it at the medium level for interim targets and default portfolio emissions intensity, and it has not yet made direct investments in climate solutions. It has expanded its investment team to more than 20 and plans to commit about £4bn to private markets by 2030. Clements said segregated mandates allow the fund to exercise more control over voting and to switch managers more efficiently, and Mikulskis said the fund now holds securities directly and has built bespoke investment management agreements with net-zero commitments and custom exclusions. Whether the move changes stewardship practices across the industry remains to be seen, but it signals that asset owners intend to hold managers to their climate targets.