The London Pensions Fund Authority (LPFA) has confirmed that more than 80 per cent of its £8bn Local Government Pension Scheme (LGPS) fund is now being managed for climate resilience, with emissions reduction and engagement targets in place across the majority of asset classes.

Publishing its latest Investor Climate Action Plan (ICAP) progress report, the LPFA said it had expanded its net-zero work each year since its 2021 commitment, moving beyond its global equities portfolio to set targets across real estate, corporate fixed income, credit, and infrastructure holdings.

The report showed that the fund has already reduced its emissions intensity in global equities and corporate fixed income by 76 per cent compared to its 2019 baseline, beating its 2030 target six years ahead of schedule.

By mid-2024, nearly 46 per cent of the fund’s global equities in material sectors were assessed as aligning with net zero, ahead of its 32 per cent interim target for the end of 2025.

In its directly held real estate portfolio, 100 per cent of assets are now deemed to be aligned.

The findings align with the Authority's commitment to invest approximately £400m, or around 5 per cent of the fund's current value, in climate solutions by 2030.

These investments will include renewable energy, energy efficiency, sustainable transport and nature-based solutions such as reforestation.

However, while progress is being made, the fund’s implied temperature rise now stands at 2.2°C, above the Paris Agreement’s “well below 2°C” goal, reflecting improved data collection and methodology changes rather than a backward step in strategy.

LPFA chief executive, Jo Donnelly, stressed that the climate programme is not a sideline but part of the fund’s core purpose.

She said the move is designed to “make sure we are investing in opportunities that help us pay members their pensions when they come to retire”, while also supporting green jobs, better public health, biodiversity and UK energy security.

Donnelly reiterated that substantial progress had been made and thanked the fund’s delegated manager, Local Pensions Partnership Investments (LPPI), for its help in delivering it.

Meanwhile, LPFA responsible investment manager, Paul Hewitt, cautioned that the path ahead remains complex.

He explained that although the fund has made “substantial progress”, the nature of the challenge is constantly evolving.

The rise in its implied temperature figure to 2.2°C, he said, was a result of improved data collection rather than a failure of approach.

“It remains a target and we will reach it,” he noted, “but it underlines just how complicated the process is.”

Donnelly added: “The impact of climate change poses a risk to the financial security of our members’ pensions. By acting now, we are protecting both their retirements and the real-world environment that those pensions will depend upon.”

---