The Transport for London (TfL) pension fund estimates that it will reduce its carbon emissions by 56% by 2030, according to its latest Net Zero Carbon Journey update.
So far, the fund has reduced its absolute carbon emissions by 30% since 2016, despite the fund being 40% larger.
The fund is also ahead of where it needs to be on its net-zero journey in its active public portfolio with a weighted average carbon intensity (WACI) reduction 18% ahead of target and 14% ahead of its benchmark.
TfL’s update said that assuming a linear path, it is five years ahead of its 2030 target in its active public portolio.
In its private markets portfolios and hedge funds, TfL is 7% ahead of target and 3% ahead of its benchmark, equivalent to two years ahead of its 2030 target.
The fund is also ahead of its target in its passive portfolio: the WACI reduction is 11% ahead of target and 6% ahead of its benchmark, equivalent to three years ahead of its 2030 target.
TfL forecasts that in the “base case” net-zero roadmap, the fund’s carbon emissions will be reduced by 56%. In the “pessimistic case”, carbon emissions will reduce by 55%, and in the “optimistic case” it expects a 58% reduction.
TfL said: “In October 2021, the trustees of the TfL pension fund committed to a net-zero plan which would see the fund achieve a 55% reduction in its carbon emissions by 2030 at the latest and a 100% reduction no later than 2045 compared to the 2016 baseline, when the Paris Agreement came into effect.”
As TfL’s targets are measured using the WACI metric system, TfL said this will allow the fund to effectively measure progress through making comparisons with the baseline.
TfL added that ensuring the long-term sustainability of the fund remains the “most important” fiduciary consideration for the trustee board and sustainability is a part of it.
“Long-term sustainability issues have a material impact on risk and outcomes, both financial and non-financial,” the update noted.
“E, S and G deserve equal consideration when setting long-term ambitions but we acknowledge that regulations or circumstances may require prioritising E, S or G over shorter time periods,” it said.
TfL added that engagement is most effective when undertaken by both portfolio managers and third-party specialists. It said that portfolio managers will have greater oversight of the assets and third parties are better positioned to facilitate engagement at a fund, industry or company level.
It continued: “Sustainability is one of a number of factors taken into account when considering the suitability and attractiveness of an investment; as a result not all holdings are expected to have perfect ESG characteristics.”
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