Responsible Investment: our pledge to climate change

Many of you will know that a Local Government Pension Scheme is what’s known as a defined benefit (DB) scheme, meaning an individual’s pension benefits aren’t linked to investment returns, rather they are guaranteed with the cost shared between scheme members, their employers and ultimately the taxpayer

Local Government Pension Funds have historically been invested across multiple areas to achieve strong investment returns to meet their fiduciary duties - to pay pensions, and in turn minimise the cost of the benefits that fall back on to the local taxpayer.

In recent years there has been an increased focus on ESG (Environmental, Social and Governance) and climate change factors informing investment decisions. This is also becoming part of a normal day to day routine for many people - whether they are shopping, investing, or looking at their lifestyle choices.

Cheshire West and Chester Council, as manager of the Cheshire Pension Fund, is working to ensure the Fund’s investment meet ambitious targets for reducing the Fund’s carbon footprint, ensuring we’re a responsible investor overall, whilst still meeting our fiduciary duties.

We have aligned to the Paris Agreement, probably the most well-known and globally accepted as a way in which we can positively impact climate change. We’ve also started to steadily decarbonise our listed equities portfolio.

The Council is working alongside like-minded organisations to support the ambitions of the Paris Agreement. We have already committed to investing in sustainable and low carbon products, as well as working with other LGPS funds to use our holdings in companies to influence and encourage positive behaviours.

Ensuring that our investment managers are holding discussions with companies who aren’t taking climate change seriously, and influencing behaviours is another way that we are taking climate change seriously.

We have committed to setting ambitious targets to reduce the carbon footprint of the Fund’s listed equities portfolio. These are already 30% below the general market, with a target to be 50% below by 2023. We mean what we say.

Going further, we have also committed to reducing the carbon footprint of our listed equities portfolio by 7.6% each year ensuring the Fund is aligned with the United Nation’s recommendation, which stated that ‘global greenhouse gases must fall by 7.6% each year between 2020 and 2039 to achieve the Paris climate target of reducing the rise in global temperatures to 1.5c.’

The Council will also seek to invest an increasing proportion of Fund assets in low carbon and sustainable assets.

Put simply – we believe in action by responsible investors to change the way we invest, and the way major corporations and organisations behave towards the environment. It’s not something we can simply do overnight but it’s something we’re striving towards, setting meaningful and achievable targets along the way.

We will keep you updated on our website www.cheshirepensionfund.org/members/