DIGITAL FOCUS 2023

Pension schemes collectively are a significant force in the investment market in the UK and overseas. How pension schemes choose to invest can make a positive difference when it comes to climate change.

The Task Force on Climate-related Financial Disclosures (TCFD) was created to improve and increase reporting of climate-related financial information, such as the environmental impact of the Scheme’s investments.

The Trustee has published its first TCFD Report, which will be updated annually. Available to download from the Scheme website, this sets out our approach to assessing, monitoring and mitigating climate-related risks and opportunities in the context of our regulatory and fiduciary duties of managing the Scheme on behalf of its members.

The Report sets out four key elements and a summary of the Scheme’s position against each. These elements are:

• The Scheme’s governance around climate-related risks and opportunities (Governance);
• The actual and potential impacts of climate-related risks and opportunities on the Scheme’s strategy and financial planning (Strategy);
• The processes used to identify, assess and manage climate-related risks (Risk Management); and
• The metrics and targets used to assess and manage relevant climate-related risks and opportunities (Metrics).

We are committed to ensuring that we have a positive impact on the environment and have set the necessary objectives to ensure this is achieved. We have agreed to a Paris-aligned target for the Scheme’s assets to reduce its total greenhouse gas emissions to be net zero by 2050, with a 50% reduction by 2030. This is also in line with Heathrow’s set target of reaching net zero emissions by 2050. We have also agreed to keep this target under review and update it as and when necessary.

Highlights from the TCFD Report

You can view or download a copy of the Scheme TCFD Statement from the Library Section of the Scheme Website. But in summary, the headlines of the report are as follows:

Governance:

• We maintain a detailed framework for assessing climate-related risks and opportunities, including clearly identifying the roles that we, the Trustee, and our advisers carry out.
• We have received various trainings on the latest regulatory developments regarding stewardship and engagement and climate-related investment opportunities, such as sustainable absolute return bonds and impact private credit. Further training has also been undertaken on various climate change metrics including training to help us select a portfolio alignment metric to measure and monitor.
• We have also put a manager engagement framework into place whereby we meet with our appointed fund managers for the sole purpose of discussing their stewardship and engagement activities.

Strategy:

• We consider climate-related risks and opportunities across short, medium and long-term time periods relevant to the Scheme, including investment opportunities that the Scheme can capitalise on.
• We implemented a fund that uses a Paris-aligned benchmark and is aligned with TCFD recommendations.
• Under the climate stress scenarios considered, the Scheme’s funding level remains relatively resilient, declining slightly in the majority of scenarios considered.

Risk management:

• We ensure that we monitor climate-related risk and receive climate-related reporting on a quarterly basis from the Scheme’s Investment Adviser. This allows us to better identify and manage the climate-related risks which are relevant to the Scheme on an on-going basis.

Metrics and targets:

• In May 2021, we agreed to a Paris-aligned target for the Scheme’s assets to reduce total greenhouse gas emissions to be net zero by 2050, as well as setting an intermediate objective of a 50% reduction in scope 1 emissions (which are direct emissions from owned or controlled sources) and scope 2 emissions (which are indirect emissions from the generation of purchased energy) by 2030. We monitor the progress against this target on an annual basis.
• We have also agreed to a target of our portfolio alignment metric, SBTi (Science-based Targets Initiative), of achieving an SBTi score of 70% by 2030. This would imply that 70% of the underlying companies that the Scheme invests in through its funds would have set decarbonisation targets that are aligned with the goals of the Paris Agreement.

The Scheme’s current progress against this objective is shown below:

Going forward, we’ll monitor the Scheme’s progress against these targets annually and explore any potential adjustments to the investment strategy to ensure that our set targets and objectives are achieved. We look forward to providing an update on our progress in our next version of the TCFD report.