Investing in assets that help the global economy achieve net zero

We said...

We will increase our investment in the climate solutions required to meet net zero by 2050 or sooner. We have not set a goal for the percentage of assets to be invested in climate solutions at this stage because of the lack of available data and recognised methodology. We expect to set a percentage goal for investment in climate solutions during 2023.

At 30 June 2022, 3% of our total assets were identified as ‘green’. Most of this exposure is related to infrastructure investments in renewable energy generation. However, we know that ‘climate solutions’ has a broader definition than just renewable energy. We also know that in many cases, particularly in listed markets, development of climate solutions is part of companies’ wider commercial activities. The availability and quality of data about climate solutions has improved in recent years but we require more complete and reliable information to accurately identify how much of LPFA’s assets are invested in companies producing climate solutions. We also need to further understand the relationships between this climate solutions goal and the other goals set out in this document. During 2023, we will be working to develop our approach in this area and expect to set a goal to invest a percentage of our portfolio in climate solutions.

Where are we now?

We continue to increase our green investment. At June 2023, 4.43% of our total assets were identified as green. This is an increase compared to the previous year. We did this by partly investing in new assets, like Hornsea One, one of the world’s largest wind farm. The increase has also been driven by the growth in value of our existing green assets.

We couldn’t set ourselves a target this year as the guidance on how to define a climate solution was only published by the Institutional Investors Group on Climate Change (IIGCC) in November 2023. This was too late for us. Now that it has been published, we will be working with our asset manager, LPPI, to deliver on this promise this year.

Asset class goals (for context only)

The asset class goals consider each asset class separately. The goals are tailored to the specifics of each asset class and will grow as new asset classes are added. For our two asset class goals, we assess the extent to which each company in our portfolio is aligned to net zero. We use the Net Zero Investment Framework (NZIF) which helps us to categorise companies by setting the criteria. These criteria set a high standard for companies to be considered net zero or aligned to a net-zero pathway, reflecting the fact that significant change is needed in the real world to achieve the Paris Agreement. As a result, a relatively low proportion of companies are currently considered to be aligned to a net-zero pathway.

The purpose of the alignment goals is to increase the number of companies that are making the real-world changes required to align to net zero.

Asset class goals

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