Leicestershire Pension Fund has invested over £1bn in climate-related funds as it looks to reach net zero by 2050 or sooner, it has revealed.
According to the £5.7bn Local Government Pension Scheme (LGPS) fund’s net zero climate strategy update, Leicestershire is on target to achieve its climate goals, with the pension fund reporting a 19.4% carbon emissions reduction between 2019 and 2023.
Coupled with the pension fund’s ambition to reach carbon neutrality by 2050, it has also committed to deliver a 40% absolute carbon emissions reduction for its equity portfolio by 2030.
To deliver these goals, the net zero climate strategy outlined that the fund has made climate-related investments and engaged with portfolio companies on its emissions.
At the end of 2023, Leicestershire had invested over £1bn in funds that tie in ‘climate friendly factors with positive financial performance’, including a £742m allocation to LGPS Central’s multi factor fund, £55m in solar power and battery systems as well as £194m in forestry.
In addition, the report outlined that Leicestershire has invested £204m into the LGIM low carbon transition fund that helps reduce its exposure to fossil fuels, which currently stands at 5.2% within its equity portfolio and was previously 5.7% in 2019.
However, this figure does not currently consider the level of fossil fuel exposure to the fund, just whether a company it has invested in does.
When moving away from fossil fuels, the fund told Room151 that it is supporting a just transition through active engagement with portfolio companies, which is done in partnership with with its pooling vehicle LGPS Central and investment managers.
“This enables the fund to support real-world impact which cannot be achieved through the divestment of carbon-intensive companies alone, when it is possible that less-responsible investors may acquire these companies.
“Ultimately, this is supportive of the fund’s long-term investment strategy with an aim to maximise investment returns while maintaining an acceptable level of risk. This enables the fund to deliver investment returns to pay pensions and lump-sum benefits and lessen the burden on employer contributions,” a Leicestershire Pension Fund spokesperson told Room151.
In terms of engagement, the report revelated that in 2022/23 the fund voted at 6,256 meetings (76,588 resolutions), opposed one or more resolutions in 4,165 meetings (mainly on-board structure), and supported all resolutions in 1,963 meetings.
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