LGPS funds make progress on net zero, but majority lack targets, according to XPS Group’s latest research

New analysis by XPS Group, a leading UK consulting and administration business specialising in the pensions and insurance sectors, on the Local Government Pension Scheme (LGPS), published today, found that nearly half (49%) of LGPS funds have established net zero targets, the majority have not yet set a net zero strategy or ambition.

XPS’s report, LGPS: Analysis of Net Zero targets, reveals:

• 49% of LGPS funds have set a net zero target or ambition.
• Of those, the majority are aiming for net zero by 2050, in line with the Paris Agreement.
• Five funds that have set targets are aiming to achieve net zero by 2030.

Whilst this is encouraging, the majority (51%) have not yet set a net zero strategy or ambition.

The XPS analysis also examines what steps LGPS funds have taken within their investments to manage climate risks:

• A high proportion of LGPS funds (74%) have switched some of their investments into strategies which have sustainable objectives built in.
• 26% of LGPS funds indicated that they had directly invested into climate solutions, such as renewable energy projects.

LGPS funds have a good opportunity to participate in long term sustainable investments to deliver real world impact as they collectively represent over £350 billion assets.

Alex Quant, Head of ESG at XPS Group, said: “LGPS funds have a responsibility to manage key investment risks associated with climate change, and that could include setting a net zero target. LGPS funds, with their scale, long-term investment horizon and readiness to explore illiquid assets, have a clear opportunity to take advantage of the long-term opportunities that will come with the climate transition.”

Daniel Carpenter, Partner and LGPS Investment Lead, added, “LGPS funds have made good progress around setting net zero targets, but it’s clear there is scope for more LGPS funds to develop a clear net zero strategy, and make changes within their portfolios to support that objective. LGPS funds should review their approach, including the approach taken by their respective Asset Pool, to ensure it aligns to the fund’s specific beliefs and priorities.”