Thursday 1st September has marked the launch of a Government consultation on the new requirements for the Local Government Pension Scheme (LGPS) for the management and reporting on their climate-related risks. These risks include the likes of attributable carbon emissions to their investments.
The proposals from this consultation include a requirement for the LGPS authorities, who need to calculate the carbon footprint from their projects, whilst addressing and assessing how different temperature rises could affect their assets and liabilities. The authorities would also be required to produce annual reports on their asset’s alignment with the Paris agreement.
Climate-related financial risks are sought to be addressed and improved upon in their management from this move, whilst bringing the LGPS in line with the requirements which are already in place for private pension schemes.
Minister for Levelling Up, Paul Scully MP said:
“Managing risks and opportunities related to climate change is essential for the future of the financial sector. It will empower better decision making and ultimately help us on the road to net zero.
“The UK is a world leader in implementing the recommendations of the Taskforce for Climate-related Financial Disclosures, which are a key factor in greening the financial sector.
“I am pleased that we are proposing to extend these requirements to the Local Government Pension Scheme, which has assets in excess of £300 billion and enormous potential to have a positive climate impact.”
The consultation also puts forward proposals which will require the LGPS administering authorities to govern more effectively, aligned with the strategy, risk management and targets for the assessment of climate related risks and opportunities.
As the UK transitions towards clean energy production in the hopes to achieve net-zero by 2050, the requirements from this consultation does not encourage funds to divest from energy companies. The energy companies are key to funding external projects that are sourcing new forms or clean/reliable energies that will be vital in this cultural shift towards decarbonisation through greener methods.