The London Pensions Fund Authority (LPFA) has published an update on the net zero progress made since the fund launched its Investor Climate Action Plan in 2022, revealing a 75 per cent reduction in listed equity carbon emissions intensity.

In 2022, the LPFA outlined six goals and targets for the listed equity section of their portfolio, which represents around 50 per cent of their total assets.

It has since made "good progress" across all goals, according to the latest update, having already reduced the emissions intensity in the listed equity part of its portfolio by 75 per cent compared to its 2019 baseline, ahead of its 2030 target, thanks primarily to its managers’ divestment from extractive fossil fuel companies.

The fund has also increased their engagement with companies in which they are invested and has made progress in aligning the listed equity portion of the fund with temperatures set out in the Paris Agreement.

Indeed, the fund's implied temperature rise measure is now showing our portfolio at 1.7˚C, down from 1.8˚C at previous report, which means the fund is currently 0.3°C ahead of its target.

The fund has also made progress towards its goal of having at least 32 per cent material sector investments aligning to net zero by 2025, as 29.5 per cent of all of the fund's listed equity holdings in material sectors are considered net zero, aligned or aligning.

This is 15.5 per cent above baseline and ahead of schedule for meeting the interim 2025 target of 32 per cent.

There is still more work ahead, however, as the fund clarified that while it has been recertified by the Planet Mark, its operational emissions are likely to increase as post-Covid travel has resumed.

Furthermore, whilst the fund previously committed to increasing investment in climate solutions, it argued that setting a baseline for this target was "challenging" given the lack of broader industry guidance in this area.

However, it pointed out that the Institutional Investors Group on Climate Change’s (IIGCC) has since shared guidance on defining Climate Solutions in November 2023, confirming that the fund will use this to help set a target later in 2024.

Commenting on the progress so far, LPFA CEO, Robert Branagh, said: “The impact of climate change brings both risks and opportunities to pension funds and it’s our duty to manage both so that we can continue to pay our members their pensions.

“As active members of the C40 Cities Invest/Divest network and in line with our net zero commitment, we aim to communicate our progress simply and clearly and share our experiences widely with our industry.

"It’s important that members, peers and other stakeholders can understand what we’re trying to do, how we are doing and the challenges that we’re all facing.”

Adding to this, LPFA responsible investment manager, Paul Hewitt, said: “We started our journey with targets for our listed equity investments and we’ve made good progress in that area.

“We’re now widening our work to add corporate fixed income and more than half of our real estate holdings.

"With this expansion, over 54 per cent of our portfolio is now under net zero targets and monitoring. While we have made good progress, we know that this is just one point in time and much more difficult stages remain ahead.

“We are using the IIGCC Net Zero Investment Framework to guide us but the guidance on how to define a climate solution was published later than we originally anticipated, and so we were unable to set a target in 2023.

“As a fund, though, we are already participating in the energy transition. As at September 2023, 4.14 per cent of our total assets were identified as green investments, which we defined as investments in businesses directly contributing to the global transition to a lower carbon economy. This is up from 3 per cent at 30 June 2022.”

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