The TfL Pension Fund has surpassed its interim net-zero target and increased its allocation to environmental, social and governance (ESG)-tilted investments to nearly 16 per cent, according to its latest report on sustainable investing.

The fund reported a 58 per cent reduction in carbon emissions intensity as of 31 March 2025, relative to a 2016 baseline, exceeding its 55 per cent reduction target for 2030.

Its long-term objective remains a 100 per cent reduction by 2045.

At the same time, ESG-tilted investments now account for 15.9 per cent of the portfolio, equivalent to £2.4bn, exceeding the fund’s 2025 target.

The majority of this allocation (86 per cent) is held in private markets, with a strong focus on renewable energy, low-carbon technology and healthcare, which together represent around £1.6bn of assets.

In her chair’s statement, TfL Pension Fund chair, Maria Antoniou, stressed that the fund remained committed to its sustainability goals despite a more challenging global backdrop for ESG, particularly in the US.

She noted that while the portfolio’s decarbonisation progress was encouraging, results needed to be interpreted with caution, given the influence of market movements and other external factors beyond the fund’s control.

Indeed, the report showed that the fund has benefited from a combination of real-world emissions reductions by investee companies, shifts in portfolio composition towards lower-carbon sectors, and valuation effects, with technology and healthcare outperforming higher-emitting industries.

However, TFL cautioned that future progress is unlikely to be linear, as remaining emissions are harder to abate and new challenges, such as the energy demands of artificial intelligence and the need to support economic growth in emerging markets, come to the fore.

Meanwhile, stewardship remained a central pillar of the fund’s approach.

Through its partnership with Morningstar Sustainalytics, the fund was involved in 796 engagements with 701 companies over the year, achieving 444 engagement milestones.

Around 38 per cent of engaged companies demonstrated above-average or high performance in response to engagement activity.

Voting activity also continued to reflect a firm stance on ESG issues.

Support for shareholder proposals rose to 60 per cent in 2025, up from 56 per cent the previous year, while the fund voted against any proposals deemed explicitly anti-ESG.

The report highlighted a rise in social-themed shareholder proposals in recent years, particularly in the US, amid heightened political scrutiny of corporate sustainability and diversity initiatives.

The fund also outlined further progress on its sustainable investing governance framework, with most elements of its ESG and climate integration checklist now assessed at the most advanced “getting ahead” stage.

Furthermore, net-zero guidelines have been embedded across key equity and fixed-income mandates, and the fund continues to enhance data coverage and scenario analysis, including through its climate change report.

Looking ahead, the fund said it would focus on consolidating its ESG-tilted allocation, deepening its stewardship partnership with Sustainalytics, including co-leading selected engagements on net zero and biodiversity, and maintaining oversight of voting activity to ensure continued alignment with its sustainability beliefs and fiduciary duties.

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