West Midlands Pension Fund
Portfolio level – Portfolio decarbonisation reference target
Baseline date: 31 December 2019
Baseline performance: 0.811 million tCO2e
Target year: 2030, 2050 or earlier
- 50% reduction in total absolute emissions by 2030 across the listed equity and listed fixed income portfolio.
- Net zero by 2050 or sooner across the whole portfolio.
GHG scopes included:
- Equity: Scope 1 & 2
- Corporate Bonds: Scope 1 & 2
Intent to include scope 3 as data availability and data quality increases.
Asset classes in scope: Listed equity and listed fixed income. This covers 57.9% of the Fund’s total portfolio as at 31st March 2022. We continuously look to improve the coverage across the portfolio both within fixed income and across other asset classes. Further detail around the timeline on expanding coverage is to be determined.
We plan to set baselines for other asset classes in due course with further consideration given to the appropriate dates of such baselines.
Methodology/net zero scenarios: We have used the PAII NZIF to help set targets consistent with the IPCC P1 scenario.
Portfolio level – Investment in climate solutions target
Qualitative goal: WMPF seeks investments in climate solutions when they are consistent with its fiduciary responsibilities, the Fund’s investment strategy and classified as a climate solution by the EU Green Taxonomy or another appropriate investor recognised framework.
Whilst we have not yet set any quantitative targets for investments in climate solutions we have committed to further explore and define the opportunity set and target meaningful allocations within this.
Baseline: Further work expected to be undertaken over the next year or so as part of establishing the baseline and formalising climate solutions definition and approach.
Methodology: To be confirmed as part of development of approach to climate solutions.
Asset level – Portfolio coverage target
Baseline date: 31 December 2021
Baseline performance: 37% of the total equity portfolio was covered by a net-zero emissions target defined by the company. Further work is required in determining the credibility of these commitments and obtaining data in line with NZIF recommendations.
Target year: No formal target year has currently been set but this is being developed.
Target: WMPF plans to realign its current assessment of ‘alignment’ with the NZIF recommendations. Targets will be revaluated to ensure the appropriate level of ambition has been selected.
Asset classes in scope: To be developed.
Data sources/methodology: WMPF currently assess alignment of companies to net zero using ‘Net Zero Target Coverage’ (defined as the weight of the portfolio invested in companies which have set a “net zero” emissions target, as defined by the company). For the nine highest carbon emitters, the following metrics are used: TPI Risk Management Quality, TPI Carbon Performance and CA100+ Net Zero Benchmark Score. This corresponds to ‘Committed to aligning’ against the NZIF guidance. Further work is required to assess alignment in greater detail to accurately determine the likelihood of companies in meeting their net zero ambitions.
Asset level – Engagement threshold target
Approach: The Fund currently does not monitor the proportion of financed emissions (within total equity portfolio or material sectors investments) that are under direct or collective engagement or net zero “aligned” criteria as defined by NZIF. Our current methodology is to use TPI and CA100+ alignment metrics to assess and monitor engagement progress for nine material holdings that are high emitters selected for prioritised engagement. Our intention is to adopt the recommendation from NZIF including the current TPI and CA100+ metrics.
Methodology: Our targets for a 50% reduction in absolute carbon emissions by 2030 aligns with the IPCC’s recommended pathway.
Operational emissions: In 2021, we set targets to reduce our operational emissions by 50% by 2030. Work is currently being undertaken to develop this strategy and including establishing a baseline.
Fossil fuel investment: Whilst the Fund does not currently have a policy on investments in coal and other fossil fuel investments the Fund adopts a general approach of engagement as set out in our Responsible Investment Framework.
See here for the Fund’s TCFD report (2022) and WMPF Climate Change Framework and Strategy 2021.