More than half of Local Government Pension Scheme funds have yet to set a net zero strategy or target to reduce carbon emissions, according to new analysis by XPS Group.
The consulting firm found that only 49 per cent had set a net zero target or ambition, with the majority of these aligned to the Paris Agreement to be net zero by 2050. However five LGPS funds had set the far more ambitious target to achieve this goal by 2030.
The XPS analysis also examines what steps LGPS funds have taken within their investments to manage climate risks. It found that almost three quarters (74 per cent) of LGPS funds have switched some of their investments into strategies which have sustainable objectives built in. Meanwhile 26 per cent of funds indicated that they had directly invested into climate solutions, such as renewable energy projects.
XPS Group said that LGPS funds have a good opportunity to participate in long term sustainable investments to deliver real world impact as they collectively represent over £350bn assets.
XPS Group head of ESG Alex Quant says: “LGPS funds have a responsibility to manage key investment risks associated with climate change, and that could include setting a net zero target. LGPS funds, with their scale, long-term investment horizon and readiness to explore illiquid assets, have a clear opportunity to take advantage of the long-term opportunities that will come with the climate transition.”
Daniel Carpenter, partner and LGPS investment lead adds:, “There is scope for more LGPS funds to develop a clear net zero strategy, and make changes within their portfolios to support that objective. LGPS funds should review their approach, including the approach taken by their respective asset pool, to ensure it aligns to the fund’s specific beliefs and priorities.”