Border to Coast Pensions Partnership, the now £120bn (€138bn) local government pension scheme asset pool, has set out its approach to integrating the social risks and opportunities of a transition to a lower carbon economy in a “just transition overlay”.
Published yesterday, the overlay reflects established practice by the asset pool and puts into effect new guidance from the Institutional Investors Group on Climate Change (IIGCC).
The guidance is aligned with the IIGCC’s Net Zero Investment Framework, a widely used guide to help set targets and produce related net zero strategies and transition plans.
Colin Baines, stewardship manager at Leeds-based Border to Coast, helped develop the guidance in his capacity as co-chair of an IIGCC working group on the just transition.
“Integrating just transition is an important part of managing long-term financial risk and enhancing portfolio resilience for partner funds,” he said.
The overlay, which is being described as an industry first, covers investment governance, capital allocation, engagement, voting and reporting. It details the asset pool’s approach by asset class, which will include a labelled bond fund scheduled to launch this quarter.
The overlay also sets out some future goals, such as how Border to Coast plans to seek engagement opportunities with sovereign, supranational and agency (SSA) issuers when SSA bonds come into scope of the asset pool’s net zero roadmap and stewardship strategy.
Nick Robins, founder of the Just Transition Lab at the London School of Economics, said the overlay “sends a strong signal to the market about the critical importance for fund managers and companies to credibly manage the social risks and opportunities of climate action in order to secure resilient long-term returns”.
One of Border to Coast’s just transition-focused stewardship priorities in recent years has been the banking sector. From 2023 to 2026, it worked with Royal London Asset Management to engage four UK banks – Barclays, HSBC, Lloyds, and NatWest – to lead the integration of just transition considerations into banking sector decarbonisation strategies.
In March, it published an end-of-engagement programme report, which noted that although no single bank had emerged as a sector leader, there had been meaningful improvements, such as inclusive product design and early efforts at regional engagement.
Speaking at IPE’s Transition conference last week, Baines said the banks had taken some “very large steps” on the issue of the just transition.
