TPT Retirement Solutions, one of the UK’s largest workplace pension schemes catering for more than 2,600 organisations, has integrated climate change considerations into its investment decisions and to meet its wider climate targets, the scheme plans to allocate capital to climate solutions without sacrificing returns.

The move comes as the scheme published its Taskforce on Climate-related Financial Disclosures (TCFD) report this morning, providing an update on its progress toward net zero.

For the move, TPT announced that it is changing its asset allocation and portfolio construction.

Cliff Speed, TPT’s chief investment officer, said: “Climate change has the potential to reduce the security of our members’ retirement benefits and represents a systemic risk to the long-term value of our investment portfolio. At the same time, the investment required to transition to a net zero economy presents an opportunity to support the expansion of climate solutions.

“For us, this means taking an approach to managing our investment risks and opportunities on behalf of our members in line with our fiduciary duty.”

In 2016, TPT made its first dedicated allocation to renewable energy generation and renewable supporting technologies. It also invested in two additional renewable energy strategies in 2021.

An area of particular focus has been greenfield investments, developing new renewable energy infrastructure. This has the positive impact of increasing the stock of assets for generating renewable energy and helps finance the build-out of supporting technologies, such as battery storage. Portfolio allocation to green infrastructures and renewable energy is now an established part of TPT’s asset allocation.

TPT also allocated to a low carbon transition fund to help manage the climate risk inherent in a market capitalisation approach, which allows it to continue to effectively implement its policy towards voting and engagement, it added.

This comes after TPT published its Climate Action Plan in December 2022 in which TPT committed to reducing portfolio emissions by a minimum of 25% by 2025 and investing at least 6% of its return-seeking assets in climate solutions.

This is with the aim of being carbon neutral by 2050 and aligns with the Intergovernmental Panel on Climate Change’s (IPCC) decarbonisation trajectory to meet the 1.5°C scenario.

“We will look to allocate capital where it will benefit our members but also contribute towards net-zero targets. We firmly believe our emission reduction target should be primarily achieved through real-world decarbonisation,” said Speed.

“As part of our plan, we have enhanced our assessment of climate-related risks and opportunities, embedded scenario planning and adopted metrics and targets,” he added.

TPT sits on the global steering group of the Paris Aligned Investment Initiative; a collaborative investor-led global forum representing investors with $34trn in assets aligning their portfolios and activities to the goals of the Paris Agreement.

The latest digital edition of IPE’s magazine is now available