2024
Quarter 4
Officers conducted a review of the progress made by the Fund towards decarbonisation in the year since June 2023 which was the last point of assessment included in the underlying analysis supporting the Fund’s net zero strategy.
Overall, the review found:
- Good progress in decarbonisation of listed equity portfolios being on track to meet the IPCC curve net zero targets. The reduction achieved as of June 2024 brought the carbon footprint down to 76% of the 2020 baseline compared to 92% as at June 2023. Coverage of companies reporting carbon metrics ranged from 97%-99% and therefore provided a high level of confidence.
- The decarbonisation achieved in the fixed income portfolios was even more significant even though the Fund has not made a formal net zero commitment in relation to these portfolios. These portfolios showed a reduction to 39% of the 2020 baseline in June 2024 compared to 60% at June 2023. We recognise that the coverage of companies reporting carbon metrics is still quite low although improving consistently. There is a possibility that the metrics might reflect an increase in carbon footprint in the short run as more companies’ data gets included.
- The number of underlying companies in the listed equity portfolios with SBTi targets also showed an improvement from 37% to 39%. Companies in fixed income portfolios with SBTi targets improved from 23% to 24%.
- Most managers provided comprehensive details of engagement undertaken with the high emitting companies in their portfolio, although decarbonisation was not the only focus of their engagement.
The Fund will need to continue to engage with managers to monitor the effectiveness of their stewardship activities with high emitting holdings. Officers anticipate that this activity will increasingly take place via the ACCESS pool in the future.
Quarter 3
The RI Working Group received presentations from the Local Authority Pension Fund Forum (LAPFF) and the institution investors Group on Climate Change (IIGCC), which are two initiatives the Kent Pension Fund is a member of.
Keith Bray, the representative from LAPFF, gave an overview of the profile and activities of the LAPFF which includes, facilitating commissioning of research into and by engagement with investee companies where ESG concerns have been identified, issuing occasional voting alerts for members to discuss with their fund managers an facilitating collaboration with other institutional investors, both nationally and internationally.
The IIGCC presented an overview of its tools and resources, most notably the Net Zero Investment Framework which supports both companies and asset owners in the setting of carbon reduction targets with clear action plans and implementing and managing the action plans through portfolio construction engagement with companies and investment solutions.
The IIGCC also provided an overview of the current regulatory landscape and direction of travel which will affect the reporting by asset managers as well as investors/asset owners.
Quarter 2
The committee approved the updated Responsible Investment policy which reflects the funds current RI Practises, including the Net Zero Commitment which was agreed in December 2023.
The RIWG also received a presentation from PIRC who have been appointed by ACCESS to develop the pool’s RI reporting capabilities and output. Given the critical role that ACCESS play in facilitating the Kent Pension Fund’s responsible investment activities and reporting, officers have identified engagement with ACCESS as an important theme for the Fund’s RI workplan.
Quarter 1
The Kent Pension Fund Committee held a strategy development day focused on responsible investment. A key purpose of the day was to discuss areas for focus for the future.
The Committee used the UN Sustainable Development Goals framework to identify specific thematic priorities in a session facilitated by Pensions for Purpose. They determined that the goals relating to climate and nature, education and sustainable cities and communities were particularly relevant.
The outcomes of this session, together with specialist guidance from the PRI (Principles for Responsible Investment), are now being used to update a revised version of the Fund’s responsible investment policy.