Agenda item

To be presented by Julie Edwards, Head of Pensions, Buckinghamshire Council.

On 1st September 2022, the Department for Levelling Up, Housing and Communities (DLUHC) launched its consultation regarding governance and reporting of climate change risks. The consultation sought views on proposals to require Local Government Pension Scheme (LGPS) administering authorities in England and Wales to assess, manage and report on climate-related risks, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). A response was attached as Appendix 1 to the report.

The consultation sought views on policy proposals to require administering authorities of the LGPS to have effective governance, strategy, risk management and accompanying metrics and targets for the assessment and management of climate risks and opportunities. The full consultation could be found at: https://www.gov.uk/government/consultations/local-government-pension-schemeengland-and-wales-governance-and-reporting-of-climate-change-risks/localgovernment-pension-scheme-england-and-wales-governance-and-reporting-ofclimate-change-risks

During discussion the following points were noted:-

• The proposed requirements would apply to all LGPS administering authorities from 2023/24 regardless of fund size.
• The consultation proposed that LGPS administering authorities would calculate the ‘carbon footprint’ of their assets and assess how the value of each fund’s assets or liabilities would be affected by different temperature rise scenarios, including the ambition to limit the global average temperature rise to below 2°C set out in the Paris Agreement. A Member commented that the Paris Agreement should be corrected in the Government consultation as it should say well below 2, preferably to 1.5 degrees Celsius. However, as the deadline for responses was today there would not be time for this to be changed.
• Question 3 Response – the draft response supported the triennial use of at least two scenario analyses regarding the Council’s overall investment and funding strategies with one scenario ‘below 2°C temperature rise’. A Member asked that it be noted that he thought this should be undertaken annually due to the speed of climate change. The Chairman made reference to the LGA’s response which stated that scenarios other than the Paris aligned one should be required to illustrate the effect of global temperature rises above 2°. A small set of plausible scenarios should be agreed and included in the statutory guidance, together with a presumption that pools should provide this expertise. Concerns had also been expressed about incurring costs in collecting the necessary data for scenario analysis. C Dobson reported that it was important to measure carbon emissions from the Fund’s portfolio rather than globally and in the short term there was not enough data relating to equity portfolios and private markets.
• Question 5 – clarification was sought on scope 3 emissions related to the fact that the draft response stated that they should be presented separately. C Dobson reported that scope 3 emissions were difficult to measure and a huge amount of data was not available. The Chairman referred to the draft LGA response which urged caution and suggested that scopes 1-3 should be reported separately. The draft response suggested allowing for a range of methodologies to be used and for an evaluation of these to be done once they had been properly tested. The response referred to the fact that they did not believe a single methodology had emerged which could be deemed the most appropriate.

The Chairman referred to the Local Government’s Association response to the consultation attached as a link below.

221012_DLUHCClimateRiskReportingconsultation_SABresponse.pdf (lgpsboard.org)

 On a vote being taken it was:-

RESOLVED that the response to the consultation on LGPS Governance and Reporting of Climate Risk, attached as Appendix 1 to the report be approved.