London Pensions Fund Authority continued to reduce its carbon intensity and exposure to fossil fuels in 2019.
The £6.1 billion ($7.6 billion) London fund published its 2019 Policy on Climate Change Review on Wednesday, outlining progress made in implementing its climate change policy. The review was undertaken by the fund's delegated money manager, Local Pensions Partnership Investments, in order to manage exposures to climate change-related risks.
Executives monitor its portfolio exposure to fossil-fuel dependent sectors, known as "brown" sectors, on an ongoing basis. It found that its exposure through listed equities was £27.3 million, or 0.43%, of the total fund as of Dec. 31. At the end of the fourth quarter 2018, brown sector exposure was £31.6 million, said a spokesman. That represents a reduction of 15.8% over the year.
The extractive exposure in the fund's listed equities portfolio fell 41.5% to £12 million over the year. The fund's global equities target allocation is 47.5%, according to the LPFA website.
Across all asset classes, the fund's exposure to brown sectors is less than 2.5% of total assets. A comparison was not available.
The fund uses the measures by the Transition Pathway Initiative — a global initiative to assess how ready companies are to transition to a low-carbon economy — to evaluate risks in its portfolio from carbon-intensive exposures.
The report said that 98% of its investments falling under TPI coverage ranked at level 3 or above at the end of 2019, meaning these companies are "taking verifiable steps to understand, address and manage climate risks which include setting forward targets for emissions reduction."
The spokesman said this calculation was not undertaken in 2018.
Executives also continued to actively engage with companies, supporting 17 shareholder proposals on climate and environmental themes at 14 annual general meetings over the year.
"We are reviewing the carbon intensity of the LPFA's listed equities portfolio annually and seeking to compare the position with decarbonization trajectories needed to meet the Paris Agreement targets for global temperature increases of well below" 2 degrees Celsius, Frances Deakin, head of responsible investment at LPPI, said in a statement accompanying the report.
LPFA assets are pooled with assets of the Lancashire County Pension Fund, Preston, and the Royal County Berkshire Pension Fund, Maidenhead, in the Local Pensions Partnership.