Task Force on Climate-related Financial Disclosures report 2024

Tackling climate change is one of our sustainability priorities, and so we’re very happy to share our plans and progress to date with you.

This year’s report covers the progress we’ve made towards our commitment to reach net zero greenhouse gas emissions by 2050, with an interim target of a 50% reduction by 2030 based on 2019 levels. The report also covers the key changes we’ve made to how your pension savings are invested, to help improve the action we’re taking on climate change.

You can read our full report, or read on for a summary.

Current global average temperatures are about 1.1°C above the preindustrial era. As average temperatures continue to rise, weather will only get worse until we bring emissions down to net zero – the point at which our emissions can be safely absorbed by nature and will no longer contribute to further global warming.

Before we can assess the potential impact of climate change to your pension savings, we need to understand what the temperature rise could be. Our ideal climate outcome is to limit the rise in average global temperatures to 1.5°C above pre-industrial levels, in line with the Paris Agreement (this is the lowest temperature rise that science tells us is realistically possible if we rapidly reduce emissions).

At the same time, we also need to plan for what happens if average global temperatures exceed 1.5°C. To do this, we need to look at three different warming scenarios to understand what climate change might mean for your pension savings.

We believe it’s in our members’ best long-term financial interests to do what we can to limit the rise of global temperatures to as close to 1.5°C above pre-industrial levels as possible.

We also adopted a new approach to climate scenario analysis, that we believe makes climate risks easier to understand. For each of the warming scenarios (1.5°C, 2°C, and 3°C), we consider what climate change might mean for different types of risk.

Previously we looked at two types of risk: transition risks (risks to a company because of changing climate policies or technology) and physical risks (risks associated with more severe weather). We now feel it’s more realistic to add a third category: systemic risks.

Systemic risks are risks that impact the entire economic system and therefore have a significant long-term effect. For example, the impact of governmental climate policies on economy-wide investment and growth, or the impact of climate change on inflation through food and commodity prices. These are new risks we have monitored this year, and the results show that the consequences of a 3°C or higher warming world is likely to be very bad for any investment portfolio.

Because of our new investment strategy, 100% of our physical global equity company holdings and over 75% of total holdings now directly link to the Trustee’s responsible investment objectives, which includes climate action. This is good progress.

Read the full report for all the metrics we track.

Our climate change-related risks and opportunities policy and our stewardship policy set out how we manage these risks and how we engage with the companies we work with. Our full report describes our governance approach in more detail.

It’s important we engage members in discussions around climate change and other key sustainability issues. In Q1 2023, we partnered with an external research company to hold focus groups with our members to get their views on their pension and responsible investment. The findings from these focus groups have since helped shape our investment strategy and reporting.