The Transport for London (TfL) Pension Fund has been urged to take “serious steps” to help address the ongoing climate emergency by ensuring that it is not involved with extractive fossil fuel investments.

The call for action was one of 18 recommendations from the London Assembly Greater London Authority (GLA) Oversight Committee, which shared a report outlining the ways the GLA, its functional bodies and pension funds can be more transparent and look to benefit London.

In particular, it recommended that the Mayor of London, Sadiq Khan, should work with the London Pensions Fund Authority (LPFA) and the TfL Pension Fund to ensure their net-zero targets align with his targets, specifically by ensuring they are sufficiently ambitious.

It also suggested that the Khan should encourage the TfL Pension Fund to report on and publish annual performance against its net-zero targets.

In addition to this, the committee encouraged the Mayor of London to ensure that the LPFA and the TfL Pension Fund take a more consistent approach to extractive fossil fuel investments, and in particular, press the TfL Pension Fund to develop “urgent action plans” and divest completely from extractive fossil fuels.

Indeed, the committee’s report noted that whilst the LPFA has moved away from investing in any extractive fossil fuels, TfL continues to invest in extractive fossil fuels, and has yet to announce any plans to stop those investments, arguing that this goes against the Mayor’s view that divesting from fossil fuels is required for the GLA to achieve net zero.

In addition to the climate considerations, the committee raised concerns regarding a lack of investment from the LPFA and TfL Pension Fund in London-based companies, arguing that the TFL pension funds can demonstrate stronger commitments to invest in London without compromising the objective of achieving diversified investment portfolios.

The committee therefore recommended that Khan convene the LPFA and the TfL Pension Fund to explore the opportunity and feasibility of the TfL Pension Fund joining and contributing to the London Fund.

In addition to this, it recommended that, whilst recognising the importance of a diverse investment portfolio to ensure best returns for members, Khan should encourage the LPFA and the TfL Pension Fund to explore ways of growing the scale of their investments in London-based companies, including increasing the reporting and monitoring of such investments to assess the impact of their investments in the capital.

It also called on the TfL Pension Fund to publish detailed information showing the extent to which its assets are invested in London.

GLA Oversight Committee chair, Léonie Cooper AM, said: “There is a balance that must be struck when considering pension funds.

“Whilst it is essential that pension funds have a diverse portfolio of investments, it is also important, now more than ever, to consider the impacts specific types of investments have on the environment.

“Whilst we are in the midst of a climate emergency, we need to show strong leadership in the fight against climate change, and we believe that by divesting from fossil fuel investments, we send a clear message that we are taking this issue seriously.

“There are also some simple steps these organisations can take to be more transparent and to improve the lives of Londoners, by investing in the London Fund for example, which will improve housing and infrastructure across London.

“I hope our recommendations are considered and I look forward to receiving a response on these matters in due course.”

Commenting in response to the call for action, a TfL spokesperson said: “The TfL Pension Fund is independent of the Mayor and TfL, and its trustees are legally required to make decisions in the interests of its members.

"Since 2016, very significant progress has been made by the fund to embrace sustainability in all investment and risk management activities. This has led to its “green” investments increasing from virtually nothing to more than £370m.

"In 2021, the fund trustees announced ambitious net-zero targets which would aim to deliver a 55 per cent reduction of the fund’s carbon footprint by 2030, increasing to 100 per cent by 2045 when compared to a 2016 baseline.”

In related news, the TfL Pension Fund recently also recently confirmed that the 2023 assesement for the scheme is expected to show that the scheme remains in a surplus position, with no changes to the TfL Pension Fund currently proposed.

In particular, the trustee confirmed that their assessment of the employer's covenant strengthened since the 2021 actuarial valuation following the latest update provided by the fund covenant advisor.

At the last actuarial valuation of the Fund as at 31 March 2021, the public sector section of the fund was well funded with a surplus of £179m, meaning the fund's assets were more than sufficient to provide for members' accrued pensions.

Furthermore, due to the strength of the fund and its current anticipated funding level, the 2023 assessment is expected to show that the fund remains in a surplus position, which, if confirmed by the scheme actuary, means no additional contribution will be required from TfL.

The fund's next actuarial valuation is due to take place as at 31 March 2024.

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