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7 December 2021

Our investment in Thames Water

Creating an investment strategy tailormade to the needs of our members is the reason that USS Investment Management exists. That means that, as well as investing in the typical things such as stocks and shares, we also look for suitable long-term investments that we think are well suited to our needs to pay pensions. Infrastructure (roads, rail, utilities), property, renewables and superfast fibre are just some of the things we invest in for this reason – they have long-term investment needs but also tend to offer investors inflation-linked returns that allow us to hedge some of our liabilities. That is why we have just agreed to increase our investment in Thames Water. After all, who better to own critical UK infrastructure such as the country’s largest water company, than a long-term responsible asset owner such as USS?

Since we became an investor in 2017, we have been on a journey with the company and its management team. The company has been able to reinvest what it may have had to pay out in dividends as a listed business and instead deal with its most immediate issues such as reducing the number of leaks and improving customer service. More than that, as we take a long-term view, we have been supportive of the company’s desires to set Net Zero targets.

There are still challenges of course. With a company whose pipes were first laid in Victorian times there are still leakage issues and we are only too aware that the 15 million customers in London and the Thames Valley deserve better. USS is committed to supporting Thames on its journey and billions of pounds will be invested in upgrades of the water and wastewater network and sewage treatment works. This is very important not just for now, but in the years to come when the effects of climate change will mean managing London’s water resources will become ever more vital to its population.

Meanwhile, Thames has also announced a detailed roadmap to achieving Net Zero by 2030 and carbon negative figures by 2040 through a combination of continuing to reduce emissions and increasing the amount of renewable energy it generates.

USS’s support, alongside its other shareholders – many of whom are long-term like-minded investors like ourselves, enabling the company to plan for decades ahead. This is not only helping the company, however, but also the broader economy. Major infrastructure works create jobs and so USS is not only investing for the financial future of its members but, at the same time, putting money back to work in its home market.

Even before Covid, the government announced hugely ambitious plans to upgrade the UK’s infrastructure and since the pandemic, the Prime Minister and Chancellor issued a letter to institutional investors including pension schemes calling for an investment “Big Bang” moment.

USS already invests more than 45% of its £82.2bn under management in the UK and our new investment in Thames Water is a clear demonstration that we are happy to do more, given the right conditions. And as long-term responsible investors, we believe our goals are very much aligned with the government’s objectives for high quality infrastructure and public services.

Nothing in this article should be construed as an offer, invitation or general solicitation to buy or sell any investments or securities, provide investment advice or to engage in any other transaction or service.