Investments: Climate change

In November 2021 the Fund approved its first standalone climate change policy.

The Policy will be reviewed annually.

View the latest version: climate change policy

The policy sets out how the Fund is responding to the challenges posed by climate change and how this links to the Investment Strategy Statement and Responsible Investment Policy.

The policy also covers the Fund's views in terms of risk management and climate risks and the approach to issues such as carbon offsetting, engagement, and potential exclusions. 

It reflects the progress made by the Fund's investment managers in developing their approach to climate change and how this is being implemented in terms of investment decisions and company engagement.

The Policy has been aligned to the Fund's Investment Beliefs, which underpin the overall approach to investment. 

The full range of Investment Beliefs are included in the Investment Strategy Statement.

The Tyne and Wear Pension Fund commits to transitioning its investment portfolios to net-zero GHG emissions by 2050 or sooner and to the reduce emissions by 40% - 45% by 2030 based upon the 2022 baseline calculated in the carbon footprint analysis.

In addition, a reduction of 65% - 75% will be targeted by 2036 and reporting against these targets will be published annually.

The Fund also commits to undertake climate based financial risk assessments and to report the results as part of an annual Task Force for Climate Related Financial Disclosures (TCFD) Report.

In order to ensure that the Fund achieves its targets we will undertake an annual carbon footprint analysis and regularly report on the progress being made.

In addition, we will undertake a triennial review of the medium and long term targets to ensure that they remain appropriate and challenging, given the ever changing, economic, environmental and technological environment. 

The review will look for opportunities to bring forward the Net Zero targets where this is considered reasonable.

The Fund also commits to working with other investors along with our Investment managers to promote the change necessary and to pursue efforts to limit the temperature increase to 1.5°C set out in the Paris Agreement. This includes our Pool Company, Border to Coast, who have made a similar commitment and we support their policy objectives.

The Pension Fund also commits to achieving net-zero GHG emissions on its own operations by 2030 in line with target set by South Tyneside Council who are the Administering Authority of the Fund.

View the Climate change policy

Border to Coast have also recently revised their Climate Change Policy. A copy of the updated policy is available on their website:

Border to Coast: Climate Change Policy

More information on Border to Coast's approach to climate change and responsible investment can be found on their website:

Border to Coast: Responsible investment

The Carbon footprint analysis builds upon the first report issued in 2021 and whilst a similar approach has been taken this year the methodology has been refined to reflect increased understanding and progress across the investment industry in this area. 

The analysis shows the Fund's carbon footprint as at March 2024 and compares this to previous years and also goes back to the agreed baseline date of March 2019. 

Further analysis was also undertaken to take the baseline back to 2010 to give a longer term perspective and to see how the Fund has decarbonised over a longer period.

The carbon footprint work undertaken shows that the Fund continues to make excellent progress in reducing Weighted Average Carbon Intensity (WACI) with a 42% reduction over the five year period, from 2019 to 2024. This is the Fund's primary risk metric. This represents an improvement of 3% from 2024. The Fund has achieved its first interim carbon emissions reduction target of a 30-35% reduction by 2025, two years ahead of schedule. 

The Fund's primary climate metric WACI (Revenue), is considered to be one of the more robust data measures but even with this metric the market coverage of the data is only 68%.  The Fund level data is expected to be lower as the Fund often invests in off benchmark assets. Whilst this level of coverage is low it is a material improvement on the position from 2019 of 34%.

All of the carbon metrics shown in the carbon footprint report are based upon Scope 1 and 2 emissions. 

For the first time in 2023 the analysis has sufficient data to calculate a Scope 3 Emissions metric. This shows the Fund is around 22% below the benchmark. However, it should be noted that data coverage is only 54% which is why the Fund does not place significant reliance on these figures.

In addition, this year's report now includes the Thermal Coal metric which shows the Fund is around 35% below the benchmark.

When setting its first Climate Change Policy the Fund considered the Net Zero Investment Framework established by the Institutional Investor Group on Climate Change (IIGCC). The Fund supported the Asset Owners Commitment included in the Framework to achieve net zero greenhouse gas emissions (GHG) by 2050 or sooner which was incorporated into the Fund's own Climate Change Policy.

As part of this Framework, organisations are asked to commit to transitioning investments to achieve a Net Zero Carbon Fund by 2050, or sooner. Once this commitment is made, organisations are required to develop a Climate Action Plan or Roadmap setting out a range of objectives and interim targets, within one year of making the commitment in order to deliver against it.

In line with the IIGCC framework and as included in the 2022/23 Service Plan actions the Fund has now produced a net zero roadmap.

The Roadmap sets out the actions the Fund will undertake in the short, medium and long term to achieve its Net Zero or sooner target.

The actions identified in the Roadmap cover the work needed to meet the commitments made by the Fund in the Climate Change Policy. These cover the measurement of climate risk and working with the Fund's investment managers to improve data quality and strengthen engagement on climate-related issues.

There are also a number of actions in relation to the work the Fund is doing around the Investment Strategy and reviewing existing mandates as well as seeking new investment in climate change solutions.

The Taskforce on Climate- Related Financial Disclosures (TCFD) is an industry-led group which helps investors understand their financial exposure to climate risk and works with companies to disclose this information in a clear and consistent way. It was launched at the Paris COP21 in 2015 by the Financial Stability Board (FSB) and Mark Carney, the UN Special Envoy on Climate Action and Finance and UK Finance Adviser for COP26.

To enable investors to make high-quality decisions and to encourage better pricing and capital allocation in markets, high quality disclosures will be needed regarding how their assets will affect and be affected by climate change.

The Fund has now produced its TCFD Report for 2023/24 which is ahead of the proposed legislative timetable for production of this report by LGPS Funds. Read the Fund's TCFD report.

The TCFD reports explains the Funds approach to managing climate-related risks covering governance, strategy, scenario analysis, risk management, metrics and targets.

The TCFD report will be published annually and will show the progress the Fund is making towards its carbon emission reduction targets through the metrics agreed in the Climate Change Policy.