BT Pension Scheme
Portfolio level
Portfolio level – Portfolio decarbonisation reference target
Baseline date: 30 June 2020
Baseline performance:
- Total portfolio financed emissions (listed equity, corporate credit & real estate scope 1-2): 931k tCO2e
- Portfolio WACI (equity, bonds, real estate scope 1-2): 135 tCO2e/mUSD
Target year(s): 2025, 2030, 2035
Target(s): Total portfolio 2035 net zero goal: -100% (scope 1-3) by 2035
Total portfolio 2025 goal: minimum -25% WACI invested (scope 1 -2)
GHG scopes included: Our overall net zero 2035 goal is for scopes 1-3, however at present we are only able to reasonably obtain scope 1-2 emissions. As such our emission intensity reduction targets are focussed on scopes 1 & 2. When SFDR makes scope 3 reporting obligatory in 2023, we will work with our managers and data provider to obtain that data.
Asset classes in scope: Publicly listed equity, corporate credit & real estate.
Methodology: In 2020 we announced a 2035 net zero goal, covering scopes 1-3, across our entire investment portfolio as well as BTPSM’s own operations. It was drafted in line with the Net Zero Investment Framework and the AOA Target Setting Protocol. See below for additional methodology.
Net zero scenarios: As our net zero by 2035 target is more ambitious than the emissions reductions stipulated in the IPCC scenarios and IEA scenarios, we believe that our target is consistent with delivering a fair share of 50% global reductions by 2030.
Emissions metric: The 2035 net zero goal is based on absolute emissions, however intensity metrics have been used alongside to adjust for the impact of the expected decline in our portfolio size, low initial coverage levels for certain asset classes and to ensure alignment with real world change. We will continue to monitor and reassess metrics as data quality, coverage and methodologies improve.
Portfolio level – Investment in climate solutions target
Qualitative goal: We will seek investments in climate solutions when they are consistent with our fiduciary investment responsibilities, the Scheme’s investment strategy and are classified as a climate solution by the EU Green Taxonomy or another appropriate investor recognised framework.
Baseline date: 30 June 2020
Baseline performance:
- Real estate (direct): 31% EPC A & B rated as per Net Zero Asset Owners Alliance guidance.
- Infrastructure (direct): 19% infrastructure in line with EU taxonomy and Climate Bond Initiative Frameworks.
For our listed investments we use MSCI ESG to show the number of holdings with exposure to high level sustainable activities, however there is no revenue breakdown available
Asset level
Asset level – Portfolio coverage target
Baseline date: 30 June 2020
Baseline performance: Total: 25%
Target year(s): 2025
Target: 50%
Asset classes in scope: Publicly listed equity & corporate credit.
We do not currently have an alignment target for our real estate as it is being developed with our asset managers.
Methodology: We have attempted to use an alignment approach which gives us the broadest portfolio coverage. It is important to state however that this approach is open to changes as methodologies and data improve. In addition, data was only available for publicly listed equity and corporate credit and may be restated when data becomes more available.
Data sources: For this submission we have used CA100+ NZ company benchmark, Transition Pathway Initiative, SBTi & MSCI data to calculate the different sectors’ alignment with net zero. As per NZIF guidance, calculations have been dependent on the investee company’s sector.
Asset level – Engagement threshold target
Approach: 23% of BTPS’ publicly listed equity and corporate credit investments, in material sectors, are net zero “aligned”.
We will undertake collective engagement and stewardship actions with 37 investee companies, representing 70% of our public equity and corporate credit financed emissions. This number may change year on year due to changes in methodology.
Additional information
Methodology: In determining what would drive our goal, we selected four key levers that would help us reduce emissions. Three of them were financial levers: 1. portfolio construction, 2. manager and mandates and 3. stewardship and corporate emissions.
- Under portfolio construction reductions, we estimated that the impact of reallocating assets towards lower emission mandates and portfolio de-risking would deliver 1-2% pa reductions.
- Under manager and mandates, we estimated that our fund managers would achieve a 2-3% pa reduction, with reduction targets written into investment mandates.
- Finally, for improvements in corporate emissions, we have assumed historical emission reduction rates achieved organically within the MSCI ACWI and Barclays Global IG Credit Indices will continue to persist at a rate of 2-3% p.a. As our goal is to achieve net zero by 2035, it is more ambitious than the 1.5C scenarios provided by IPCC and IEA amongst others and as such, it is hard to map it to specific climate scenarios and pathways.
Operational emissions: BT Pension Scheme Management and associated companies have been aware of climate change for some time. Since 2019, BT Pension Scheme Management (BTPSM) and BT Pension Scheme Administration (BTPSA) have offset their operational emissions. In 2021, BTPSM and BTPSA offset carbon emissions of 77 tonnes.
In line with the announcement of BTPS’ net zero 2035 goal, BTPSM, BTPSA and Procentia, a private pensions software business owned by BTPSM, set their own 2035 net zero targets for operational emissions. To ensure a thorough baseline is established, they are assessing their carbon footprints with a carbon consultant and will create an emissions reduction plan with net zero targets during 2022.
BTPS Climate Change Policy; BTPS Annual Report & TCFD disclosure; The targets stated here have also been submitted to the Net Zero Asset Owner Alliance target setting protocol (TSP).