Baseline date: 2019

Baseline performance: Each Fund will have a different baseline metric performance relative to their benchmark.

For example, the weighted average carbon intensity of GMPF’s benchmark was 349 tonnes CO2e/GBPm in 2019 and the corresponding intensity of the portfolio was 283 tonnes CO2e/GBPm in 2019 and 232 tonnes CO2e/GBPm in 2021 (active listed equities only).

The weighted average carbon intensity of WYPF’s benchmark was 280 tonnes CO2e/GBPm in 2021 and the corresponding intensity of the portfolio was 264 tonnes CO2e/GBPm (active listed equities and corporate bonds).

Target year(s): 2030

Target(s): By 2030, weighted average carbon intensity of funds to be 50% below the carbon intensity of the respective 2019 benchmark (consistent with the target of the major external Asset Managers to the Northern LGPS).

GHG scopes included: Our service provider currently has limited coverage and includes scope 1, scope 2 and partial scope 3 upstream emissions in its analysis. We will endeavour to incorporate Scope 3 emissions over time, in line with the Net Zero investment Framework.

Asset classes in scope: Active listed equity and corporate fixed income with a view to expanding across other asset classes expediently as data, methodologies and guidance improves.

Net zero scenarios: Scenarios used by some of the main external Asset Managers to the Northern LGPS are the P2 emission pathway of the IPCC special report on global warming of 1.5 degrees Celsius, the IPCC RCP 2.6 and IEA SDS (aggressive mitigation) pathways.

Quantitative target: In April 2015, GMPF and the London Pensions Fund Authority formed a joint venture to invest directly in infrastructure assets, with a focus on the UK. The joint venture is structured as a limited liability partnership and has been named GLIL
Infrastructure LLP (GLIL). As part of the Local Government Pension Scheme (LGPS) pooling discussions, West Yorkshire, Merseyside and Lancashire County Council pension funds joined GLIL in December 2016. In March 2018 GLIL was re-structured as an open-ended FCA Regulated fund to facilitate potential new members. Additional commitments made by existing members mean GLIL now has committed capital of approximately £2.5 billion.

GLIL began investing in October 2015 and has completed ten transactions with a total value in excess of £1.6 billion.

One of GLIL’s earliest transactions was the purchase from SSE of a 21.7 per cent stake in Clyde wind farm for £150 million. GLIL invested an additional £30 million in September 2017 with a further £88 million invested in the summer of 2018. Clyde now has a total generation capacity of 522MW, making it one of the largest onshore windfarms in Europe.

GLIL’s remit includes investment in new build (so-called ’greenfield’) infrastructure projects. Alongside GLIL’s partnership with Iona to construct £130 million of bioenergy plants around the UK, it has also financed two joint ventures for the build and commissioning of more than a thousand new rail vehicles across two rail franchises in the south of England. The first of these fleets is already entering service on the Greater Anglian network.

Approximately one third of the GLIL assets under management is currently invested in Climate Solutions. Growing GLIL is a key objective for the Northern LGPS pool and investments in Climate Solutions are expected to grow in parallel.

Baseline date: 2021

Baseline performance: $1,070m

Target date: 2030

Target: Additional Climate Solutions as follows: $1,990m (Aggregation of GMPF, WYPF & MPF)

Methodology: For the baseline, the Funds have estimated the value of carbon solutions within their allocations to Infrastructure.

For the target, the Funds have estimated (i) their overall size in the Target Year using actuarial assumptions, (ii) the size of their Infrastructure allocation in the target year based on current strategic allocations. The proportion of the Infrastructure allocation that is invested in Climate Solutions in the Target Year is prudently assumed to be the same proportion as in the Baseline.

The methodology used is in line with that used by the Climate Investment Coalition pledge announced at COP26 and of which NLGPS funds were a part. This used SDG7 to classify ‘climate solutions’, rather than the EU taxonomy.

Baseline date: 2021

Baseline performance: Northern LGPS has mapped its listed equity holdings to Transition Pathway Initiative ratings (GMPF and WYPF only).

Northern LGPS held £3.7 billion in shares of the 425 companies analysed by TPI.

By value, 25% scored 4* (perfect score), 33% scored 4, 35% scored 3, 5% scored 2, 2% scored 1 and 1% scored 0 (unaware of or not acknowledging climate change as a business issue).

Target: In partnership with its Asset Managers, Northern LGPS is developing 5 year portfolio coverage targets, recognising the multiple different underlying portfolios of the three Northern LGPS Funds.

Northern LGPS engages with companies directly, and indirectly through either external Fund Managers and/or as active members of the Local Authority Pension Fund Forum. It is estimated that a significant majority of financed emissions in material sectors are currently subject to direct or collective engagement. Northern LGPS is developing its approach to quantifying the proportion of financed emissions engaged across the three Northern LGPS Funds.

LAPFF Quarterly Engagement Reports are available here.