The London Pensions Fund Authority (LPFA) has announced that 80% of its £8bn (€9.1bn) total assets – or approximately £6.4bn – is now invested with climate risks in mind, as part of its commitment to becoming a net zero pension fund by 2050 or sooner.
The £6.4bn figure reflects the fund’s decision to broaden its climate strategy. Instead of focusing only on global equities, it now also covers real estate, corporate bonds, credit, and infrastructure.
The approach has also shifted from simply reducing portfolio emissions to tracking implied temperature rise and engaging with companies to encourage progress toward Paris Agreement goals.
The announcement follows LPFA’s latest progress report, in which the fund confirmed that emissions and engagement targets now cover the majority of the fund.
New targets were added to the fund’s real estate and corporate fixed income assets over 2023 and 2024, which are being directly managed by the Local Pensions Partnership Investments (LPPI).
The administering authority and Local Government Pension Scheme (LGPS) fund with more than 100,000 members announced in June that it was setting a climate solutions target of 5%, a requirement for all pension funds committing to climate action under the Institutional Investor Group on Climate Change (IIGCC)’s Net Zero Investment Framework (NZIF).
Jo Donnelly, LPFA’s chief executive officer, said: “Our climate action commitment is a strategic move to ensure that we are investing in opportunities that help us pay members their pensions when they come to retire.
“The investments that we make will also support new, skilled employment in sectors supporting the energy transition, help reduce air, water and noise pollution, improve public health, protect biodiversity and bolster the UK’s energy security.”
Paul Hewitt, responsible investment manager at LPFA, added that while the fund has made substantial progress, the journey is not linear.
“The nature of the challenges is evolving fast, and so we mustn’t be complacent. For example, while we achieved a major goal by announcing a climate solutions target, our implied temperature rise figure is currently above the 2.0°C Paris Agreement threshold,” he said.
“That is mainly due to better data collection and methodological improvements, which have led to an upward adjustment. It remains a target, of course, and we will get there, but this underscores how complex this process is,” he added.
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