Investors are increasingly focused on using their assets to aid the battle against global warming, and the LGPS is no exception. In a recent development, the Northern LGPS pool signed up to partner with campaign group Make My Money Matter (MMMM) as part of the pool’s drive to invest 100% of assets in line with the Paris Agreement on climate change.
Speaking during the Room151 quarterly LGPS webinar, Tony Burdon, chief executive of MMMM, described Northern’s involvement as “fantastic news”.
MMMM was founded to help policy holders persuade pension funds to move funds to sustainable investments.
Burdon’s comment came during a webinar that explored the role LGPS funds could play in reaching net zero emissions.
Pension funds pledged to MMMM are asked to align their portfolios to net zero emissions by 2050, halve emissions by 2030, and grow their portfolios for “positive impact”. They are also asked to “mainstream ESG” in portfolios, and become more active shareholders while increasing engagement with members.
Burdon said a number of organisations had pledged to MMMM, including Nest, Aviva, the Church of England and, in the LGPS, Brunel and now Northern.
However, Burdon said though MMMM is talking to more pension funds about joining its camapign, it would not be enough because “we need much greater momentum running up to COP 26 if we’re to tackle the climate nature emergency.”
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COP 26, the UN’s climate conference, tabled for Glasgow in November 2021, will be the first meetings of nations to tackle global warming since the signing of the Paris Agreement in 2015. Observers view the gathering as a critical milestone for nations to renew their ambitions to cut carbon emissions, not least because research shows that the world is making slow progress towards Paris targets while some nations, notable the US, have withdrawn from the agreement.
Paris calls for nations to limit global warming no more than 2℃ above pre-industrial levels, while pursing policies to potentially go no further than 1.5℃.
During the Room151 webinar, James Beven, chief investment officer at CCLA, delivered bad news that, “we are not on course to net zero emissions on any timeline in terms of the current structure and function of the global economy.”
Bevan added: “There is an absolute challenge for all of us to pursue and favour delivery of zero net emissions on the intended timescale.
“We have to therefore set mandates that match that ambition; we have to require managers to have clear plans to execute to the mandates provided. And there is no substistute for reality, as opposed to hot air: we need to engage with the underlying [investee] companies and entities to drive positive change.”
Bevan was at pains to emphasise that making sustainable investments is not at odds with pension funds making returns.
“I have to argue very clearly and very consistently that there is no conflict of interest between a long-term commitment to arresting, and then reversing the challenges of climate change, and delivering excellent long-term financial returns,” he said.
Reporting
Deirdre Cooper, co-head of thematic equity at Ninety One, the sustainable investment managers, highlighted three issues: the importance of considering sustainability in all asset classes; the need for detailed reporting that doesn’t “over stress sustainability benefits”; and reasons to be optimistic about investment and beating climate change. “It is a huge challenge we have ahead of us,” she said.
Valborg Lie, stewardship manager at LGPS Central, told the webinar: “Climate action failure is the standout long-term risk that the world faces.”
Lie added that for engagement and broader stewardship to succeed requires strong collaboration, illustrating the need for an organisation like the Climate Action 100+ group. With 500 investors in its membership, with around $47trn dollars under management, the campaign works to engage with 171 of the world’s biggest companies, among them some of the largest industrial emitters of carbon emissions.
“If you influence those,” said Lie, “you can influence whole sectors and whole markets and the global economy.”
To watch the full LGPS Climate special webinar click here.
Photo by Mika Baumeister on Unsplash.
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