DIGITAL FOCUS 2024

Pension schemes collectively are a significant force in investment markets 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 help investors, such as pension schemes, consider the environmental impact of the companies they are considering investing in.

The Trustee has published a TCFD Report. 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’re committed to ensuring that we have a positive impact on the environment and have set the necessary objectives to ensure this is achieved. We’ve agreed to a Paris-aligned target to reduce total greenhouse gas emissions of the Scheme’s assets to net zero by 2050, with a 50% reduction in the Scheme’s carbon footprint by 2030. This is also in line with Heathrow’s set target of reaching net zero emissions by 2050. We’ve 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 Documents page on MyPension.

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 training 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 a target for the Scheme’s assets to reduce their total greenhouse gas emissions and achieve net zero by 2050; we also have an interim target in place of achieving a 50% reduction in the Scheme’s carbon footprint by 2030. We monitor the progress against this target on an annual basis. Our progress against these targets is shown below:

We have set an additional target for the underlying companies in which the Scheme invests in through its funds, to align with the goals of the Paris Agreement. We aim for 70% of the companies responsible for our portfolio’s overall emissions to, by 2030, have set credible net zero targets. The Scheme’s progress against this objective is shown below:

The metrics shown in the above charts are summarised in the below table:

We will continue to monitor the Scheme’s progress against these targets annually and explore any potential adjustments to the investment strategy in order to meet our set targets and objectives. We look forward to providing an update on our progress in the next TCFD report.