UK LGPS fund expands renewables and natural capital allocations

South Yorkshire Pensions Authority (SYPA) has committed a further £350m to the Border to Coast Climate Opportunities fund and bolstered its investments in forestry.

The £10.2bn UK Local Government Pension Scheme (LGPS) fund’s latest commitment to the climate opportunities fund is in addition to an original investment of £245m, made in 2022.

The Border to Coast opportunities portfolio invests in projects including hydrogen technology, synchronous condensers, battery storage systems and lithium-ion battery creation.

SYPA has committed to a net zero target for its investments of 2030, with George Graham, director of SYPA, explaining that this further £350m allocation to Border to Coast’s fund, “continues our emphasis on investing to support the transition to net zero, with it being a key part of our overall investment strategy to do that.”

Graham told Room151 that overall, around 6% of SYPA’s portfolio is committed to “climate opportunities”, with £595m invested in Border to Coast’s product and close to £100m in other mandates.

In addition, SYPA has committed £175 to a side-car arrangement with Border to Coast. “It is a way of doubling up our exposure to renewables and natural capital through the pool because we have significant elements of our strategic asset allocation in those areas,” Graham explained.

Natural capital commitments

Alongside committing to “climate opportunities”, the pension fund has also further invested £100m in Border to Coast’s UK Opportunities Fund, launched in April 2024, and £130m in two forestry funds.

The investment in natural capital includes an £80m commitment to Campbell Global, part of JP Morgan, who will invest in international forestry funds and a £50m investment to Gresham House as previously covered on Room151.

According to SYPA, the £50m committed to Gresham House will go towards making acquisitions in Scotland and Wales, generating returns through sustainable harvesting and the sale of timber.

Jayne Dunn, chair of SYPA, said: “The pension fund remains deeply committed to addressing climate change, reflecting our steadfast dedication to investing in diverse solutions aimed at combating this global challenge. This commitment underscores our ongoing efforts to mitigate greenhouse gas emissions throughout our investment portfolio.

“The benefits of Border to Coast’s Climate Opportunities fund is that we can tilt our investments into more climate positive areas within the LGPS pooling framework to ensure our portfolio is supporting our net zero goals.

“Whilst our forestry investments offer a resilient, diversified source of returns while further supporting our net zero journey and efforts to combat climate change and support biodiversity.”