Considering Climate Change Risk
Of the environmental risks, climate change is the one we believe has the most potential to affect the value of our portfolio.
Therefore, we have developed a policy that aims to ensure that climate change risk is considered more explicitly throughout our investment process.
Why Do We Need a Climate Change Policy?
In December 2015 at the UN talks in Paris nearly 200 countries successfully agreed an historic deal to reduce carbon emissions.
The implications of the deal are potentially far reaching for many sectors of the economy and companies in which pension funds invest. Institutional investors are therefore likely to come under increasing pressure to disclose and manage the carbon risk embedded within their portfolios.
The deal is also expected to accelerate investment in zero and low carbon assets. Institutional investors should also ensure that their investment processes can identify attractive investments driven by the transition to a lower carbon economy.
What is Our Policy on Climate Change?
As part of its approach to Responsible Investment, TPT considers a range of ESG, including corporate governance, human rights, bribery and corruption and labour and environmental standards.
Of the environment issues that we consider, we believe that climate change presents the most material risk to the value of assets held in our portfolios and there is an increasing body of academic evidence to support this, TPT has a policy to ensure that climate change risk is more explicitly considered through the investment process. It is a strategic part of our approach to being a responsible investor and has three pillars:
1. Understanding how exposed our portfolio is to climate change. We will review the carbon risk at both the over-arching portfolio and underlying fund level on a regular basis to understand where risks might arise. This review may include carbon foot-printing, scenario analysis and the use of other metrics. Where appropriate, this analysis will be used to inform our long-term investment strategy and also to meet the disclosure requirements that TPT has committed to by signing the Montreal Pledge.
2. Making sure that new and existing investments are managed in a way that take account of climate change risks and opportunities. We have updated our Statement of Investment Principles and our Voting and Engagement Policy to make reference to climate change. We also incorporate climate change expectations and reporting requirements into new mandates where appropriate and make sure this is part of on-going manager monitoring.
3. Actively engage with the wider investment community and policy makers on climate change. As part of this TPT is an active member of the Institutional Investors Group on Climate Change (IIGCC).
The IMT provides an update on the implementation of its Climate Change policy to the IC on a quarterly basis through the ESG Dashboard and it is committed to reporting on its progress as part of its annual update on Responsible Investment.
TPT is committed to working towards compliance with the Financial Stability Board Taskforce's Recommendations on Climate-related Financial Disclosures (FSB TCFD) and will use the guidance it sets out for asset owners as the framework for reporting on climate change going forwards.
Our Climate Change Journey So Far
Scroll along to see our climate change milestones
Investment Committee presented with Mercer's Report Climate Change Scenarios
Responsible Investment Officer
Appointed Responsible Investment Officer to lead strategy and develop appropriate policies
Investment Committee given detailed training on climate change
Climate Change Policy
TPT Retirement Solutions formally adopts Climate Change Policy
Start to incorporate climate change into new contracts with investment managers
Established four new funds where clauses had been inserted into the Investment Management Agreements to ensure the managers acted in accordance with our Climate Change Policy
Carbon Footprint Analysis
Trucost performed the second carbon footprint analysis of the fund. The findings help inform our ongoing climate change strategy discussion.
TPT signed the Montreal Pledge, an initiative which encourages investors to make public the carbon footprint of their portfolios.
The Paris Pledge for Action
Over 1,000 non-state actors (cities, civil society groups, investors, regions and others) signed the pledge which demonstrates they are ready to play their part to support the objectives of the Paris agreement.
2°C Portfolio Analysis
The Investment Committee considered the impacts of 2°C scenario on the performance of its growth portfolio to help inform long-term asset allocation decisions, climate risk management and to identify climate related opportunities.
Alongside some of the world's largest pensions funds, TPT signed an investor letter urging G20 nations to ratify the Paris climate deal, to double global investment in clean energy and develop carbon pricing.
Award for Best Report on Climate Change Disclosure
TPT Investment team awarded Best Report on Climate Change Disclosure