LGPS Central targets net zero by 2050

Local Government Pension Scheme (LGPS) Central has committed to transitioning its investment portfolios to net-zero greenhouse gas emissions by 2050.

Alongside this, the group has set an interim target to achieve a 50 per cent reduction in greenhouse gas emissions by 2030 across its equity and fixed income portfolios.

The commitment aims to provide additional focus and transparency on its response to the current climate emergency, with plans to utilise the Institutional Investor Group on Climate Change’s (IIGCC) Net Zero Investment Framework to achieve the goal.

Initial efforts will be focused on listed equities, corporate bonds, sovereign bonds and real estate, although LGPS Central also committed to extending its focus to other classes as reliable data become available.

The group will aim to achieve a real reduction in greenhouse gas emissions rather than an avoidance of them, using engagement to influence change and challenge corporate management on their reporting of emissions, their activities to reduce them, and their use of off-sets and lobbying.

"We will escalate concerns where necessary and use our voting rights accordingly," it stated.

The commitment aims to help frame conversations with external managers and investee companies, reinforcing the schemes expectations around climate risk management and establishing parameters around the decarbonisation of its portfolios.

The group also clarified that the whilst the commitment is on behalf of LGPS Central and is in respect of the assets stewarded by LGPS Central, it is made “with full support of the eight partner funds that make up the pool”.

It stated: “If we are to collectively limit global warming to 1.5°, the next 30 years will herald an unprecedented global transformation of the real economy and investment markets.

"This transformation will result in an even stronger focus on ESG integration, climate risk management and stewardship, to both fulfil fiduciary responsibilities and to accelerate the transition to a low carbon economy."

However, LGPS Central also acknowledged that the net-zero target is "not a replacement for robust ESG analysis", confirming that it will continue to have high expectations of its external managers and expect its investment portfolios to reflect this detailed scrutiny.

Commenting on the news, Make My Money Matter senior finance adviser, Huw Davies, said: “LGPS Central pool’s announcement is a welcome commitment that goes further on net zero – committing to provide opportunities to invest in climate solutions, and halving emissions by 2030.

"By also engaging with their portfolio companies and using their pension power to make them change, LGPS Central is setting an example for how the local government pension sector can make the transition to net zero.

“But the industry still has a long way to go – with around £1.7trn remaining in schemes that have yet to align with Paris, and around 70 per cent of major schemes yet to commit to robust net zero.

"In 2022, we need to see all pension schemes that are lagging behind step up and commit to robust net zero, so that we can build a world that is actually fit for retirement.”

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