Avon and TfL pension schemes step up commitment to net zero

The Avon Pension Fund and the Transport for London (TfL) Pension Fund have stepped up their commitment to reach net-zero targets, outlining "ambitious" interim objectives to help reach the goals of the Paris Agreement.

Trustees of the TfL Pension Fund have committed to achieving a 55 per cent reduction in carbon emissions by 2030 at the latest, and a 100 per cent reduction no later than 2045 vs the 2016 baseline

The strategy was highlighted as “without doubt the single most important development in the fund’s sustainability agenda to date”, with trustees initially setting the wheels in motion for the strategy following the 2015 Paris Agreement.

The scheme has already taken the first step on the way to a greener way of thinking through its coal exclusion policy, which also saw at least 15 per cent of the fund targeted to invest in environmental social and governance (ESG) tilted investments.

The trustees clarified that there may be quarters or years when the fund’s emissions could increase for reasons beyond their control, although the scheme is hoping to minimise uncertainty by keeping an open mind and staying agile.

The Avon Pension Fund, meanwhile, has announced plans to transition its entire legacy low-carbon equity strategy, around £780m, into the recently launched Paris Aligned Benchmark (PAB) developed by FTSE Russell and Brunel Pension Partnership.

This move is expected to deliver annual emissions reductions of at least 7 per cent per annum, and follows a similar commitment from the Oxfordshire Local Government Pension Fund, which saw £530m moved to the PAB fund.

The scheme has also set interim targets to reflect the need to accelerate the trajectory to net zero over the next 10 years, committing to a 43 per cent reduction in its absolute emissions in the equity portfolios by 2025 and a 69 per cent reduction by 2030, compared to 2020 baseline emissions.

Commenting on the strategy, Avon Pension Fund Committee chair, Councillor Paul Crossley, stated: “With the progress Avon has made so far it is essential that we maintain momentum and continue to demonstrate leadership at this critical time.

“Protecting our assets for the benefit of our members, as well as managing the risks and opportunities that climate change presents, is an extremely complex task but with the most recent changes to our investment strategy.

“I’m confident that we are taking the positive steps necessary to deliver on our pledge to be Paris-aligned across our investment portfolio."

Avon Pension Fund investment panel chair, Shaun Stephenson-McGall, also described the new targets as demonstration of how the scheme is "actively responding" to member priorities, highlighting the changes as a "turning point" in the fund's approach to climate change.

“It is imperative that we continuously review our progress and I look forward to the next milestone in 2022 where we’ll be taking stock of how our strategy has delivered against its goals with a clear message that divestment remains an option where companies fall short of our expectations," he continued.

“I am immensely proud of the role the Avon Pension Fund Investment Panel has had to play in helping to get this decision across the line."

Phoenix Group Pension Scheme has also recently announced a number of interim targets on its route to net zero, including reducing its carbon emission intensity for its £250bn investment portfolio by at least 50 per cent by 2030.

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