Avon Pension Fund brings forward its carbon net zero target to 2045

Avon Pension Fund, the local government pension scheme serving Bristol, Bath, and surrounding areas, has announced its new carbon net zero target. The £5.4 billion fund, providing pensions for 140,000 people, has agreed a fresh target to achieve carbon net zero by 2045, bringing forward the target by five years from 2050.

This builds on significant work already completed by the Fund to make its investments more climate-friendly, including £400 million committed in 2020 to renewable infrastructure and £2 billion invested over 2021-23 in climate-aligned sustainable equities.

The announcement coincides with the publication of the Fund’s annual Responsible Investment Report and follows a consultation exercise involving over 5,000 members of the scheme and extensive local stakeholder engagement.

Councillor Paul Crossley, Chair of the Avon Pension Fund Committee, said: “Climate change poses the biggest risk to our planet. There is no Planet B and we can all play our part in protecting Planet A. During 2023 we consulted extensively with local councillors, staff, employers, and trade unions. We also ran a member survey which received over 5,000 responses.

“There was broad agreement among stakeholders that the Avon Pension Fund should set more ambitious climate goals and we are delighted to bring forward our net zero target to 2045, an ambitious but achievable date. We will keep this target under regular review and will seek to accelerate further as technology and government policy develop.”

Nick Dixon, Head of Pensions, Avon Pension Fund, added: “We believe there’s increasing convergence between financial returns and responsible investing. We want to seize this opportunity for the Fund to achieve its objectives in a sustainable way, contributing positively to the climate transition. Our new strategy delivers a step change in our approach, focused on meaningful real world impacts.”

Measures agreed by the Fund’s Pension Committee in December 2023 also include:

• A new approach to investment in high carbon companies, which by 2030 must be aligning with net zero, otherwise the Fund will divest from such companies. Progress will be independently monitored vs criteria provided by external organisations such as Climate Action 100+.
• Intermediate targets: the Fund is planning to achieve a 43% reduction in carbon emissions by 2025 and 69% by 2030.
• Broader coverage of Fund assets within climate targets, with a new target to reduce carbon intensity of the Corporate Bond portfolio 60% by 2030 versus 2019 baseline. The Committee has also set an ambition to achieve 100% coverage, aligned with industry reporting meaningful climate metrics across all asset classes.
• 70% of financed emissions either aligned with net zero or covered by active engagement in 2024 and 90% by 2027.

As well as the new climate targets and approach, the Committee is assessing how the Fund can allocate assets to Nature Based investments, e.g. investing in forests/timber/agriculture and funds targeting biodiversity which can be considered alongside climate solutions. The Investment Panel will explore the potential of such investments in 2024.