WE'RE COMMITTING TO NET ZERO
The LPFA Board has announced its commitment to setting net zero by 2050 with an interim target for 2030 as a goal for portfolio emissions.
This is in recognition of the risks that climate change poses to businesses and society and therefore to the financial health of the LPFA Fund. Since 2017, we’ve had a climate change policy in place to help us manage those risks. You can find out about some of the progress here.
Our net zero emissions aspiration is the next step in maintaining the long-term financial sustainability of the Fund, protecting our members financial future and being a responsible investor.
To help us reach net zero and play our part in meeting the Paris Agreement aim of limiting global warming to well below 2 degrees, the LPFA Board will adopt the Paris Aligned Investment Initiative Net Zero Asset Owner Commitment in line with the Institutional Investors Group on Climate Change (IIGCC) Net Zero Investment Framework (NZIF).
WHAT HAVE WE DONE SO FAR?
The Fund has made substantial progress reducing the risk associated with climate change. As at 31 March 2021, only 0.6% of the Fund’s investments in listed equities were in traditional energy companies (i.e. Oil and Gas or Extractive Fossil Fuel companies). This compares to 3.2% for the MSCI All Countries World Index benchmark. Of these investments, 91% (by value) were assessed by the Transition Pathway Initiative as factoring climate change into their operational decision-making. The carbon intensity of the Fund’s listed equities portfolio is in decline, with an ongoing trend of reduction seen since annual monitoring commenced in December 2018.
LPFA is also investing in assets which contribute to a lower carbon future with 2.7% of the whole portfolio identified as “Green”.
WHAT IS THE COMMITMENT?
This is a commitment to transition our investments to achieve net zero portfolio greenhouse gas emissions by 2050, or sooner. Among other activities, this can involve:
- setting interim objectives and targets to reduce emissions on the way to 2050,
- engaging with companies, asset managers, and others to ensure that their activities are consistent with achieving global net zero emissions by 2050 or sooner
- setting a target and reducing our operational emissions.
Further details of how we intend to achieve the commitment will be explained in a Climate Action Plan which, as required by the IIGCC commitment, will be published within 12 months.
WHAT IS THE IIGCC FRAMEWORK?
The IIGCC is a membership body of over 300 asset management companies and pension funds across Europe. It has created the Net Zero Investment Framework (NZIF) to help investors reach net zero. Net zero is a new challenge for all of us and, in line with LPFA strategic intent, collaboration will be important to us in reaching our goal. Each investor will reach net zero in their own way, but frameworks and guidance can help to ensure real progress is made. The NZIF includes a range of guidance including how to tackle lack of data on carbon emissions, metrics which can be used for some of the assets we invest in (sovereign bonds, corporate bonds and real estate), insights on engaging with companies to encourage their move to a low carbon future and content on investing to drive change.
You can find out more about the IIGCC framework here.
A PERIOD OF PLANNING
The Fund will spend the next 12 months developing our net zero plan which will include a target for 2030. This plan will be published in 2022.
FURTHER READING
If you are interested in finding out more about climate change, you might like:
- NASA’s Climate Change site
- The Mayor of London’s Climate Change section
- London Councils Climate Change page
- The United Nations Climate Change page
MORE INFORMATION ABOUT THE LPFA AND OUR APPROACH TO CLIMATE CHANGE