Unison presses LGPS schemes to work harder on green transition
Workers’ union Unison has called for local authority pension schemes to back ‘green’ causes with dedicated funds as part of their increasing commitment to climate-aware investing.
At a meeting of the Avon Pension Fund committee in late June, representatives of the union presented a statement supporting the Local Government Pension Scheme fund’s actions on environmental issues, including a commitment to invest in renewable infrastructure and a move to divest from fossil fuels within five years.
However, the statement also called for more actions to support a potential “Green New Deal” supported by Unison and other unions, which aims to create a “prosperous zero-carbon society with good green jobs”.
Avon should “continue to drive genuine impact” through its participation in the Brunel Pension Partnership by setting up “green funds”, the union said. Such funds should “invest in companies helping to achieve a net-zero transition, including in emerging sectors such as energy efficiency, renewable energy, energy storage and smart energy systems”.
All projections to date of climate impacts have been over-optimistic. At current rates of emission we have 12 years, four months and 28 days until we emit the entire remaining global carbon budget that will take us to 1.5 degrees
Brunel allocated to a renewable infrastructure fund in February, with Avon investing £24.3m as of March 31 2020, according to council documents. The pension scheme has pledged to allocate 2.5 per cent of its £4.5bn portfolio to renewable infrastructure via the pool.
Unison’s statement continued: “The second important point is a focus on justice, not only intergenerational justice, but in securing justice in terms of equitable distribution of the costs of transition for those working in affected industries."
Avon should also invest in “local economic ventures, in well-paid unionised green jobs to replace those lost in the fossil fuel industry”, the union added.
Avon sets emissions net-zero target for 2050
Bruce Shearn, chair of the Avon Pension Fund, outlined several other targets the scheme has set to support climate causes and a “just transition” to a low-carbon economy. These included committing to a net-zero target for emissions within its investment portfolio by 2050. As part of this, the scheme aimed to reduce the carbon intensity of its portfolio by 30 per cent by 2022.
Mr Shearn explained that the scheme intended to invest “at least” 30 per cent of its portfolio into “sustainable and low carbon investments” by 2025.
He also highlighted the fund’s work with Brunel – which has been climate-aware investing since its foundation in 2016 – as well as memberships of initiatives including Climate Action 100+ and the Institutional Investors Group on Climate Change.
The scheme recently completed a consultation on its draft investment strategy statement, which includes an aim to align the portfolio with the 2015 Paris Agreement on climate change.
As well as the renewable infrastructure allocation, Avon also had £163m in a socially responsible investment fund run by Jupiter as of March 31, and £497.5m in Brunel’s low-carbon fund.
Calls for full fossil fuel divestment
In addition to Unison’s statement, Sarah Warren, cabinet member for climate emergency at Bath and North East Somerset Council, addressed the committee to encourage additional action on climate change from the pension fund – including a call for 100 per cent of the portfolio to be invested in “low-carbon and sustainable assets”.
The scheme has a “fiduciary duty” to its members and should not be investing in fossil fuel-related assets at all, Ms Warren said.
Projected returns under a 2°C scenario – with global average temperatures rising by 2°C above pre-industrial levels by 2030 - were “coloured a hopeful green” in Avon’s forecasts, she added.
“But I would argue that the outlook is bleak, for both investment returns and society, even at 1.5°C,” she stressed.
Ms Warren said: “The empty supermarket shelves at the start of the pandemic have illustrated the fragility of our complex food supply chains here in the UK. Just how much would it take to disrupt them completely?
“Remember that all projections to date of climate impacts have been over-optimistic. At current rates of emission we have 12 years, four months and 28 days until we emit the entire remaining global carbon budget that will take us to 1.5 degrees.”
Brunel – which was set up to pool the assets of 10 local government pension schemes in the south and south-west of England – has established a climate change policy that aims to “systematically change the investment industry to ensure it is fit for purpose” for a world in which the temperature rise is kept “well below 2°C”.
Govt to force schemes to publish climate risk disclosures
The largest pension schemes will be legally required to assess and report on climate change risks within their investment portfolios under new government rules.
Research by Mercer published on Wednesday reported a surge in interest in climate-aware investing among European pension funds.
More than half (54 per cent) of the 927 schemes surveyed said they were “actively considering the impact” of climate change on their investments.
More broadly, the vast majority (89 per cent) said they considered wider environmental, social and governance issues as part of their investment decision-making. While this was primarily driven by regulation, more than half (51 per cent) said the move was driven at least in part by the potential impact on investment returns.