Pension fund The People's Pension transfers £28 billion from State Street due to disagreements over responsible investment strategies
The alignment between long-term investors and large asset managers, notably State Street and The People's Pension, in the realm of climate stewardship, is currently fraught with significant tension and divergence.
State Street, a leading asset manager, has introduced a Sustainability Stewardship Service. This service is designed to align stewardship activities with client priorities on climate change and other sustainability issues, such as nature, human rights, and diversity. The service includes dedicated proxy voting and engagement policies, and emphasizes continuous improvement based on client input. State Street's efforts highlight their commitment to integrate sustainability considerations into stewardship, with specialized teams and frameworks supporting clients who wish to engage portfolio companies on climate topics [3][5].
However, this proactive approach has faced pushback from some large long-term investors, including public pension funds like The People's Pension. These investors have expressed growing concern about whether asset managers’ stewardship truly reflects fiduciary duties focused on financial value rather than broad environmental or social goals. In 2025, US state officials and pension funds criticized climate-related mandates, such as those from net-zero initiatives and collaborations like Climate Action 100+, demanding asset managers abstain from such mandates and provide transparency that aligns strictly with traditional fiduciary standards [1][4].
Data published by advocacy groups indicates a steep drop in State Street's support for environmental and social shareholder resolutions at annual meetings from 2023 to 2025, signalling a potential strategic retreat or recalibration in stewardship approaches that may conflict with more ambitious climate goals favored by some pension investors [2].
This tension reflects a broader "stewardship recession," where some asset owners push back against ESG and climate-related stewardship practices, seeking more control over proxy voting and engagement consistent with a narrower definition of fiduciary duty centered on shareholder value [2][4].
The People's Pension, a UK DC master trust with over £30bn in assets, has reduced its investments with US manager State Street and transitioned £28bn of its assets into segregated mandates held by Northern Trust. This shift towards segregated mandates offers the People's Pension greater control over its investments and stewardship [6].
The People's Pension, which represents more than 6.5m members and has more than £300m of inflows every month, plans to commit £4bn to private markets by 2030 and expects to double its assets to £100bn over the next ten years, with a goal of hitting £50bn within the next five years [7].
Amundi, the €2.2trn French manager, has been appointed as the People's Pension's passive equity manager, while Invesco will handle more than £8bn in active fixed income investments [8]. The segregated mandate approach allows the People's Pension to tailor mandates to its responsible investment goals [9].
Despite the perceived misalignment on climate stewardship, The People's Pension had previously shifted the bulk of its passive equity holding into a climate-aware strategy managed by State Street [10]. However, the pension fund now seeks to go further, possibly signalling a shift in its investment strategy.
This notable misalignment and ongoing friction between large asset managers' climate stewardship approaches and the expectations of some long-term institutional investors is a trend that continues to evolve in the financial landscape of 2025.
Sources: [1] https://www.ft.com/content/baf751d6-8c8c-492d-b909-180e2266a92d [2] https://www.ft.com/content/4a844665-12f7-440a-a63c-3f028367e858 [3] https://www.statestreet.com/content/dam/statestreet/docs/about-us/corporate-responsibility/statements/2023/03/statestreet-2023-climate-risk-disclosure.pdf [4] https://www.ft.com/content/b1b2685e-e72a-413f-a65f-55630086b526 [5] https://www.statestreet.com/us/institutional/investment-solutions/sustainability-stewardship-service.html [6] https://www.ft.com/content/95d8f046-b1a5-4b93-a3e0-46175a8f209d [7] https://www.ft.com/content/95d8f046-b1a5-4b93-a3e0-46175a8f209d [8] https://www.ft.com/content/95d8f046-b1a5-4b93-a3e0-46175a8f209d [9] https://www.ft.com/content/95d8f046-b1a5-4b93-a3e0-46175a8f209d [10] https://www.ft.com/content/95d8f046-b1a5-4b93-a3e0-46175a8f209d
- The People's Pension, expressing concerns about the alignment of fiduciary duties with broad environmental or social goals, has reduced its investments with State Street and transitioned a significant portion of its assets into segregated mandates with managers like Amundi and Northern Trust.
- In light of the ongoing tension between asset managers' climate stewardship approaches and the expectations of some long-term institutional investors, The People's Pension aims to commit £4bn to private markets by 2030 and expects to double its assets to £100bn over the next ten years, pursuing a strategy that aligns more closely with its responsible investment goals.
- As a response to the perceived strategic retreat in climate-focused stewardship by some asset managers, such as State Street, the financial industry is witnessing a trend where long-term institutional investors, like The People's Pension, are seeking greater control over their investments and stewardship, favoring segregated mandates that prioritize environmental and social considerations.
