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Local Authority Pension Funds step up climate action in Green GB week
Today, a group of local government pension funds managing £18 billion have declared their commitment to ensuring their investment strategy meets the goals of the Paris Climate agreement. They are joined by Brunel Pension Partnership Ltd, one of the new pools of the Local Government Pension Scheme.
For Green GB Week, Merseyside, Islington, and the Environment Agency pension funds together with Brunel, coordinated by ShareAction, are announcing that they are committing to take steps to ensure their investment strategies are compatible with the crucial goal of keeping temperatures rises to below two degrees.
Actions to align the funds’ portfolios with the goals of the Paris Agreement include commitments to increasing their assets in low-carbon investments, such as sustainable infrastructure, reducing their exposure to high-carbon assets, and conducting robust engagement with investee companies as set out in the Investor Agenda.
Funds are acting on their legal duty to consider climate risk in their investment strategy, to be accountable for this to all of their stakeholders and in particular to protect the retirement prospects of their members from the deteriorating effect of climate change on the value of investments. They also understand that this is not just basic risk management, but that cleaner investments could be more profitable in the long run.
This action is all the more urgent given last week’s report by the Intergovernmental Panel on Climate Change which predicted that we have just 12 years to avert the worst environmental and financial consequences of climate change.
Claire Perry, Minister for Energy and Clean Growth, said: “The UK has led the world in cutting emissions whilst growing our economy -?with clean growth driving incredible innovation and creating hundreds of thousands of high quality jobs. Ten years on from the Climate Change Act, the first ever Green GB week is a time to build on our successes and explain the huge opportunities for business and young people of a cleaner economy. I’m delighted to see how many more businesses and organisations such as ShareAction are seizing this multi-billion pound opportunity to energize their communities to tackle the very serious threat of climate change.”
Paul Doughty, Chairman of Merseyside Pension Fund (MPF) said in welcoming delegates to the PLSA conference in Merseyside: “I hope that LGPS investors would follow the lead being set by MPF in making its investment strategy align with the goals of the Paris Agreement and by reporting using the TCFD climate risk framework. In 2018 MPF aims to reinvest one third of our passive equities in the UK and North America markets to a low-carbon benchmark. We also plan to continue to increase our significant investment in infrastructure, with an expected £250 million investment in renewables by 2020.”
Craig Martin, Chief Pensions Officer of the Environment Agency Pension Fund, said: “I welcome the increased emphasis placed by government on ensuring that pension fund trustees take into account environmental, social and governance issues and in particular climate change. The Environment Agency Pension Fund has had a strong plan in place for over 10 years, reinforced by our 2015 Policy to Address the Impact of Climate Change, which allows us to both manage climate risks and tap into the opportunities that the low-carbon transition presents. Our own approach is to engage where possible. We are pleased to be joined by other LGPS pension funds today on this journey.”
Denise Le Gal, Chair of Brunel Pension Partnership Ltd said: “Brunel is committed to being 100% climate aware. We are decarbonising listed portfolios through investment risk analysis, engagement and using tools such as TPI and carbon footprinting. We have also designed portfolios to enable clients to invest in low carbon opportunities and are fully committed to reporting in line with the Task Force on Climate-related Financial Disclosure.”
David Poyser, Chair of the Islington Pension Fund, said: “Last year, we cut the carbon footprint of our fund’s passive shares by 45%. We will build on this significant progress by looking at all our options for reducing the fund’s carbon footprint and for continuing to divest from fossil fuels, which will help us to protect our members’ pensions, whilst protecting the planet. We look forward to working with other LGPS funds in London that have also announced divestment programmes. We will also continue to support LGPS engagement programmes with energy companies, for example through having voted for the ‘Follow This’ resolution at Shell, supported by ShareAction.”
Friederike Hanisch, European Network & Project Manager at ShareAction, says: “Last week’s UN-backed report on our climate breakdown was a frightening reminder of the need for swift and collaborative climate action by the people managing our money. Research has shown the vast benefits associated with low-carbon investments, in particular sustainable infrastructure. I am pleased to see that an increasing number of LGPS pension funds realise this potential, delivering benefits for both their members and the communities they operate in. With these funds setting an example of leadership within local government pensions, I sincerely hope that today’s announcement will encourage other LGPS funds and pools to take bolder steps to enable the fulfilment of the Paris goals.”
Today’s announcements follow a series of declarations made by investors, companies, states, regions and cities at last month’s Global Climate Action Summit held in San Francisco. The commitments made are sending a strong signal to national governments which will be required to step up and strengthen their contribution to the Paris Agreement between now and 2020.