State Street's pension funds management faces a £28bn withdrawal due to perceived misalignment in their stewardship role.
The People's Pension Shifts Towards Segregated Mandates for Enhanced Climate Stewardship
The People's Pension, a UK defined contribution (DC) master trust with over £30 billion in assets, has made a significant shift in its investment strategy, reducing its investments with US manager State Street. This move is part of a broader commitment to climate stewardship and net-zero targets.
The shift towards segregated mandates may offer The People's Pension a lot more control on voting and stewardship. Amundi and Invesco have been appointed to manage the bulk of the People's Pension's assets, marking a significant shift away from State Street. Amundi will manage the master trust's £20 billion passive equities portfolio, while Invesco will take responsibility for more than £8 billion in active fixed income investments.
The People's Pension has built bespoke investment management agreements (IMAs) with net-zero commitments and custom exclusions. This move is a response to concerns around the perceived misalignment on climate stewardship with State Street, whose backing of ESG resolutions has fallen from 30% in 2021 to 9% in 2024, according to ShareAction. State Street is ranked 63rd out of 70 in ShareAction's latest Voting Matters report, indicating very little support for social and environmental resolutions.
The People's Pension has also been at the forefront of an initiative among long-term asset owners aimed at pushing managers to uphold their climate pledges. The reduction in investments is not the sole trigger for this change in strategy, as the People's Pension has expanded its investment team to more than 20 members and plans to commit some £4 billion to private markets by 2030.
The People's Pension has transitioned £28 billion of its assets into segregated mandates held by Northern Trust. This move is a strategic, forward-looking approach to climate stewardship that not only addresses emission reductions but also robust transition planning and physical climate risk resilience. The People's Pension plans to commit a significant portion of its assets to climate solutions, although it has yet to confirm direct investments in this area.
The development of resources like the Climate Resilience Investment Framework (CRIF) further enables investors to assess and adapt to physical climate risks, which remain material even under net zero scenarios. There is a recognized need for coherent and standardized stewardship frameworks, such as proposed EU-wide stewardship codes, to enable consistent, cross-border investor engagement that supports the global transition to a low-carbon economy.
As major asset managers increasingly commit to climate change stewardship, with strong integration of environmental, social, and governance (ESG) policies and rising adherence to initiatives like the UK Stewardship Code and net zero plans, The People's Pension's shift towards segregated mandates might send an important signal to managers that asset owners have no intention to scale back on their climate targets.
[1] Investment Week, "ESG adoption continues to grow among asset managers," 2025. [2] ShareAction, "Voting Matters 2025," 2025. [3] Task Force on Climate-related Financial Disclosures, "Recommendations," 2023. [4] Climate Resilience Investment Framework, "Framework Overview," 2024. [5] European Commission, "Proposal for a regulation on sustainability-related disclosures in the financial services sector," 2023.
- The shift in The People's Pension's investment strategy towards segregated mandates indicates a growing importance of environmental science, as this strategy aims to enhance climate stewardship and commit to net-zero targets.
- Despite the move away from State Street, concerns regarding responsible gambling and its potential impact on personal finance still persist, as some investors question the alignment of interests in the casino-and-gambling sector with long-term investment goals.
- Asset managers are increasingly focusing on integrating environmental, social, and governance (ESG) policies into their business models, which could lead to opportunities for environmental-science-oriented businesses in areas like climate change mitigation and adaptation.
- With the rising adoption of ESG policies, it becomes crucial for the finance industry to develop standardized stewardship frameworks, such as EU-wide codes, to ensure consistent, cross-border investor engagement and support a responsible transition to a low-carbon economy, benefiting both the environment and personal-finance portfolios.
