HSBC UK Pension Plan to Invest $328 Million in Renewables

The HSBC UK Pension Scheme (£27.8 billion ($36.7 billion) is going to pump $328 million into British renewable energy.

The bank’s pension plan, which manages the benefits of 190,000 members, will put the money mostly toward acquiring wind farms and solar plants. The announcement comes during the British government’s “Green GB Week,” which promotes the benefits of low-carbon growth.

Mark Thompson, CIO of HSBC Bank Pension Trust UK, told IPE.com that green investments “make clear financial sense,” as the bank, and pensions like it, want “steady, inflation-adjusted income streams.”

“Renewable infrastructure assets provide this return profile and are largely uncorrelated with traditional capital markets,” he said.

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Although HSBC has not decided which businesses it will pick up, the pension plan wants to have a renewable energy portfolio large enough to power homes in an area about the size of Oxford, the university town which has a population of 150,000.

Renewable energy accounts for about 30% of Britain’s electricity.

“Renewable energy infrastructure can provide attractive risk-adjusted returns for investors seeking predictable cash flows derived from real assets over the long term,” Russell Picot, chair of the UK bank’s trustee board, said. He added that renewables and other inflation-linked assets “are well-suited to provide the income required to meet our long-term pension liabilities.”

Greencoat Capital, a specialist firm, will manage the commitment.

By Chris Butera

Tags: ESG, HSBC, Pension Plans, Renewable Energy, solar, wind

The investment portfolio for Penn State University’s endowment returned 7.8% for fiscal year 2018, missing its benchmark of 9.0%, and falling below the 8.3% median return of universities as measured by Cambridge Associates. Last year, the endowment returned 12.6%.

The performance is among the lowest reported by other major public universities so far this year. For example, University of Virginia, University of Texas, Michigan State, and University of California reported returns of 11.4%, 11.27%, 11.1%, and 8.9% this year, respectively.

The endowment’s assets increased during the year to $2.85 billion from $2.62 billion, and had three-, five-, 10-year, and 20-year annualized returns of 6.4%, 7.9%, 6.6%, and 7.0% respectively. And over the past five years (2014-2018), the total endowment increased $830.5 million, or 24.8%.

According to Penn State’s investment office, the university’s long-term portfolio had 50% of its assets invested in domestic and foreign public equities, 20% in private equity and venture capital, 12% in fixed income/short-term investments, 10% in diversifying (hedged) strategies, and 8% in real assets.

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The investment office said the endowment is prepared for a potential financial crisis by being able to provide liquidity on short notice. It said that 40% of the portfolio’s assets are invested in stocks and bonds that can be converted to cash in a matter of days. Of this, 5% is held in money market accounts and short-term fixed income investments as of the end of June.

However, 25% percent of the assets are invested in more than 120 different partnerships funds or other non-marketable investments that are considered illiquid because the underlying holdings are not readily marketable, or the timing of future realizations into cash distributions is uncertain.

Tags: Penn State, Pennsylvania, Returns