The South Yorkshire Pensions Authority (SYPA) has announced plans to focus its future investment on supporting the move to low-carbon economy, arguing that climate change is the "single biggest risk" to the scheme's assets and liabilities.

In its 2023 Investment Strategy, the SYPA revealed that it is considering a mix of options, including investment in negative carbon investment solutions such as timberland or renewable energy sources, and finding alternatives to some existing investments that have more explicit climate risk objectives.

Sharing the new strategy, the SYPA argued that climate change is the "single biggest risk to the value of their investment assets and value of their pension promises (liabilities)", arguing that it can improve the way it addresses climate risk within its investments without affecting the likelihood of having cash available to pay pensions.

Indeed, analysis of the proposals by Hymans Robertson revealed that the proposed strategy has on greater than 80 probability of successfully maintaining the funding level target, which is very similar to the current strategy.

In particular, the plans include proposals to move money out of traditional equity and fixed income investments, and to move money into increased allocations for natural capital, renewable energy and climate opportunities, which invests in technologies that support the move to a low-carbon economy.

At the same time, the SYPA stated that it will continue to ask its fund mangers to increase the pressure on companies to adopt and more importantly implement clear plans to decarbonise their operations.

In addition to this, the authority said that it will consider proposals to earmark parts of existing investment allocations worth up to 5 per cent of the fund’s value to create a Place Based Impact Investment Portfolio, which will have a particular focus on South Yorkshire based investments.

South Yorkshire Pensions Authority chair, Cllr John Mounsey, stated: “The Pensions Authority exists to pay pensions, and in doing that we have to focus on ensuring that we invest scheme members savings in a way that achieves a required rate of return.

“However, the work we have done shows that we can do this while at the same time accelerating the progress of our investments towards net zero and also making a significant contribution to improving the sustainability and resilience of the South Yorkshire economy and the places where most of our scheme members live.

“We are proud to be able to support South Yorkshire’s economy with more local investment than ever before with our new Place Based Impact Portfolio. This approach will really help to boost our area’s economy, providing much needed new homes, environmentally sustainable industrial developments and provide more employment opportunities for the community.”

The plans outlined in the new investment strategy are to be considered in full at a meeting on 16 March.

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