The £10.2 billion Lothian Pension Fund (LPF) said it has launched a new Climate Change Policy that introduces “a presumption against continued investment in laggard oil & gas companies.”
LPF, the second largest Local Government Pension Scheme provider in Scotland, said: “This new policy enhances and extends LPF’s approach to climate change and details their climate change commitments and ambitions …
“To support the goal of transitioning the real economy to net zero greenhouse gas emissions by 2050 …
“To promote a managed decline for the fossil fuel sector – introducing a presumption against continued investment in laggard oil & gas companies …
“To report annually in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) …
“To develop a climate action plan – to support the resilience of their investment strategy to climate change.”
Lothian Pension Fund administers the Local Government Pension Scheme (LGPS) in Edinburgh and the Lothians. It is a multi-employer scheme with more than 93,400 members and 56 employers.
LPF is unique in Scotland within the LGPS in holding FCA-regulated status, which allows it to provide advisory services and to manage assets for third parties.
Lothian Pension Fund chief investment officer Emmanuel Bocquet said: “The new Climate Change Policy achieves the right balance between implementing our commitments on climate and ensuring we maintain an appropriately unconstrained investment universe to deliver the required risk-adjusted investment returns over the long term for our employers and members.
“Introducing a presumption against holding shares in laggard oil and gas companies increases our scrutiny of the overall sector and helps us identify and encourage those firms we view as better aligned with our goals.”
Gillian de Candole, Head of Responsible Investment at LPF, said: “Climate change is a systemic issue presenting financially material investment risks and is therefore a stewardship priority for us.
“Our new Climate Change Policy sets out the actions we’re taking to enhance the resilience of our investment strategy, as well as how we support the real-world transition to net zero, recognising that this requires a significant change in the shape and structure of the global economy, including a shift away from fossil fuels.”
Lothian Pension Fund added: “Our ambition is that over the next 5 years we’ll increase the alignment of our investee companies to a future low-carbon world …
“We aim to position Lothian Pension Fund to benefit from the energy transition by having more exposure (across the fund) to climate solutions than in companies whose primary business relates to fossil fuels …
“Most of LPF’s investments in climate solutions are in our infrastructure portfolio. This is a diversified portfolio that includes investments in renewables and energy transition assets, such as electricity transmission links (within the utility sector), new electric trains (transport sector) and energy from waste projects (environmental services).
“Infrastructure investments represented 16% of the value of Lothian Pension Fund’s assets at 31 December 2024, making it one of the largest allocations among UK LGPS funds.
“Of the total infrastructure portfolio, the majority is invested in the UK, and around a quarter of the portfolio is invested in renewables (wind, solar and hydro) and environmental services.
“In addition, Lothian Pension Fund had over £100m invested in forestry assets at 31 December 2024. While this is mainly commercial forestry, it all has sustainable forestry certification.”