Climate Change

Climate Change

Climate Change Framework and Strategy for 2021

The West Midlands Pension Fund is fully committed to aligning with the goals of the Paris Agreement and net zero ambition by 2050 or sooner. As a pension fund and asset owner we seek to understand the risks associated with climate change; ensure fund resilience as we decarbonise; and champion effective collaboration and increased transparency in our approach, as we continue to forge our pathway to net zero and contribute to building sustainable futures for all. Our 2021 Climate Change Framework and Strategy [5Mb] framework outlines our approach, how we will measure our progress and continue to adapt to the changing policy and regulatory environment.

Strong progress has been made since we developed our first Climate Change Framework and Strategy - our next phase to 2026 will see an increase in momentum as we continue to work alongside others and utilise the assets that we own to influence positive change on a global scale. At this point in time we find it hard to quantify exactly what this will mean, but it will be a further material reduction in exposure to the inherent physical and transition risks associated with the shift to a net zero economy and further investment in climate solutions. Over the next five years we will expand the scope and quality of measurement and data collection, to continue to ensure meaningful change and alignment across our investments and our own operations.

Building on the progress to date and consistent with the principles set out in our Climate Pledge, we have set a number of evolving targets to:

· Refine metrics to measure progress and alignment towards 2050 net zero and our interim targets

· Further reduce our investment portfolio and operational carbon emissions

· Continue to explore opportunities to invest in aligned products and those focused on climate solutions

· Collect, measure and track our operational and investment portfolio emissions data and look for areas where we can seek to make reductions

· Engage governments, companies and investors to ensure disclosure, action and alignment to net zero pathways throughout value chains

· Collaborate to influence positive change and drive meaningful action on a global scale.

Our approach and targets are expected to evolve as the landscape and industry develop. The targets outlined here are subject to change and are reliant on the developing global governmental commitments and policies.

What is the Fund's stance on climate change?

Climate change, and the risks and opportunities it presents to us as long-term investors form part of our critical thinking not just in the way we approach investment, but in the Fund's wider objectives and delivery themes which aim for global influence alongside delivering for local people.

The Fund recognises the need for action to address climate change on a global scale and that it has a role to play in ensuring transition to a lower carbon economy, but also that it will take action on the part of governments, companies, investors and individuals to ensure the long-term sustainability of our planet. We believe that the Fund by its actions and in collaboration with others, can and will contribute to change, at the same time as meeting its primary aim of managing the financial risk inherent in investments, to support in meeting the funding objectives and pension promises made to Fund members.

The Fund acknowledges that this remains a fast evolving space and believes it appropriate to set shorter-term objectives in its Climate Framework and Strategy as well as more progressive longer-term ambitions.

Climate Related Financial Disclosure

As a supporter of the Task Force for Climate-related Financial Disclosure recommendations, since they were first published in 2017, the Fund has published climate-related financial disclosure against the TCFD recommendations in its Annual Report & Accounts.

For the first time the Fund has published a separate stand-alone Climate Related Financial Disclosure 2020 [3Mb] to further enhance transparency and disclosure around our approach to climate risk management. The Fund is also very pleased to announce that its 2020 TCFD report was used as an Asset Owner TCFD case study example [185kb] at the Accounting for Sustainability conference in December 2020.

The Fund's response to climate change is embedded within the Investment Strategy and Investment Strategy Statement and is supported by our Climate Change Framework and Strategy and wider Responsible Investment Framework.

What is the Fund's stance on the issue of divestment from carbon-intensive stocks and Oil and Gas companies?

At the present time, the Fund does not believe that divesting its investments from carbon-intensive stocks would be in the best interests of our members. This is a position that the Fund continues to re-evaluate as the market dynamic changes. The Fund believes that there is a chance of re-pricing of oil and gas assets but remain unsure as to the exact timing and quantum. In the short to medium term, the Fund favours intensive and robust engagement, where we believe there is opportunity to add value to the portfolio over the short to medium term by working with the companies (and indirectly through our fund managers) to help them reshape their business models.

The Fund recognises the risks associated with climate change and the potential for these to impact on the long-term value of the Fund investments, but also the opportunity for investment reward, for example in renewable infrastructure investments, particularly during the period of transition to a lower carbon economy. The Fund is very aware of the scientific evidence around climate change and takes this into account when making investment decisions across all asset classes, as detailed in our

Collaboration and Engagement

The Fund supports and utilises a variety of strategic partnerships to continue to inform and develop its approach to the consideration of climate-related risks and opportunities, including: WMPF Climate Risk Position Statement (March 2021) [166kb].

Archived Items

Climate Change Statement 2020 [53kb].