Church pensions board publishes climate plan to align portfolio with net zero

The Church of England Pensions Board has published its first Climate Action Plan to align its investment portfolio with net zero.

The Pensions Board said the framework focusses on transitioning the economy away from fossil fuels and aligning financial flows with the aims of the Paris Agreement.

It said it will address these aims through six strategic pillars, starting with a commitment to establishing targets and governance to oversee the strategy.

The board will also campaign on public policy, ensuring it enables the transition in the real economy, challenging negative climate lobbying and encouraging positive climate lobbying from portfolio companies.

Other parts of the strategy include building the tools, knowledge and data needed to direct capital towards the transition, putting in place robust stewardship and engagement with companies, and monitoring the appointed asset managers.

Finally, the pensions board will aim to assess, report on and align the carbon footprint of its investments by asset class with a transition to net zero, including stress-testing, it said.

Adam Matthews, chief responsible investment officer of the Pensions Board, said: “In serving our pension scheme members, we are focused on protecting their retirements in the long term.

“Climate change is a clear and present risk that will be far more damaging to investment portfolios and to the global economy if we fail to transition to net zero in an orderly, timely way.

“This is why our Climate Action Plan focuses on key systemic risks like demand for fossil fuels, corporate climate lobbying, climate finance in emerging markets, and seeking strong ambition from companies.”

It comes after the Pensions Board’s decision in May to pull its investment from fossil fuel companies over failing to align with the Paris Agreement.

The board said 10 years of attempts to bolster decarbonisation ambitions had resulted only in some companies coming close to alignment but none crossing the threshold.

Its climate plan includes a new focus on engaging companies that are significant users of fossil fuels, including the automotive sector, utilities and steel, as well as a continued focus on the mining industry, which is a key sector within the transition.

It also outlines ambitions to focus on increasing reporting, measurement and investment in climate solutions as well as working in partnership with other pension funds to increase investment in emerging markets through leadership of the Emerging Markets Just Transition Investment Initiative.

The Church of England announced earlier this year that it has invested £30 million to achieve its 2030 net-zero target.

Thousands of churches, cathedrals, clergy houses and other buildings in England will benefit from the investment, which comes as the first phase of a series of grants and projects, it said.