LPFA Intends to Allocate 5% of Its Funds Towards Environmental Solutions
London Pensions Fund Authority Commits to Investing 25% of Assets in Climate Solutions by 2030
The London Pensions Fund Authority (LPFA), which manages £8 billion in assets for over 100,000 members, has announced a significant commitment to climate solutions. The fund aims to allocate at least 25% of its investment portfolio to climate solutions by 2030.
This ambitious target reflects LPFA’s commitment to significantly support low-carbon investments and align its investments with net zero goals. The investments will be directed towards energy efficiency and renewable energy, sustainable industry, transport, reforestation, and wetland restoration projects.
The LPFA’s approach is part of a broader strategy to accelerate decarbonization and invest in climate technology and sustainable infrastructure. While the exact breakdown within this allocation is not detailed, such investments typically include renewable energy, energy efficiency, clean transport, industrial decarbonization, and circular economy technologies.
The LPFA’s commitment to climate solutions is in line with its strategic priority of achieving net zero. In 2021, the LPFA pledged to become a net-zero fund by 2050, using the Institutional Investors Group on Climate Change's (IIGCC) Net Zero Investment Framework as guidance.
The LPFA plans to invest around £400 million, or 5% of its total value, in climate solutions by 2030. This includes an additional £250 million directed towards environmental assets via the LPPI’s Environmental Opportunities Fund. The LPFA currently holds around £150 million in existing climate solutions assets within its fund manager LPPI’s equity and corporate fixed income holdings.
As new IIGCC guidance becomes available, the LPFA may consider revising its baseline and adjusting its target commitment upwards, with support from its pool providers, LPPI. It's worth noting that the actual investments in climate solutions may be "much higher" as there was no definitive guidance on what infrastructure or real estate assets can be classed as a climate solution until recently.
The LPFA’s commitment to climate solutions aligns with the growing trend of UK pension funds setting explicit climate-related targets and aligning with national and international net zero frameworks. Many UK pension funds and related investment vehicles are increasingly channeling capital into climate opportunities to meet regulatory expectations and fulfil their fiduciary duties to manage climate risk and contribute to sustainability.
[1] Climate Action 100+, "LPFA's Climate Strategy: A Step in the Right Direction", 2022. [2] The Guardian, "UK pension funds pledge to align investments with net zero carbon targets", 2021. [3] UK Government, "Net Zero Strategy: Build Back Greener", 2021.
- The London Pensions Fund Authority's (LPFA) decision to invest 25% of its assets in climate solutions by 2030 also signals a commitment to financial inclusion, ensuring that more people have access to investments that address climate-change and have a positive social impact.
- To achieve this goal, the LPFA plans to invest in areas like renewables, pensions, and environmental-science, moving away from traditional fossil fuel investments and towards investments in clean energy and sustainable industries.
- With this commitment, the LPFA hopes to contribute significantly to the development finance needed for climate solutions, supporting not only environmental protection but also fostering economic growth and job creation.
- By aligning its investments with net zero goals, the LPFA demonstrates a prudent approach to finance, recognizing the long-term economic benefits of investing in science-based climate solutions and minimizing the financial risk associated with climate-change.
- Furthermore, this investment strategy reflects the LPFA's understanding of the growing importance of environmental-science in tackling climate-change and its commitment to making informed, responsible investment decisions based on the best available scientific evidence.
